Ahead of its much hyped IPO (Initial Public Offering), Uber was being touted in some circles as a US$120 billion business.
Thankfully, common sense (and I use that term lightly) prevailed. In May 2019, Uber hit the market at a more 'realistic' value of…US$76.5 billion.
What does that sort of money buy you?
In Uber's case, it appears to be a whole lot of red ink.
This is part of Financial Times Alphaville's coverage of Uber's second quarter 2019 results (emphasis is mine)…
The quarterly net loss, which hit $5.2bn vs $878m a year ago and included $3.9bn in stock based compensation expenses related to the IPO, was spectacular in its own right. (On an adjusted basis the EBITDA loss came in at $656m, which marks an improvement on Q1.)
'But the thing that really hit market sentiment was the slowdown in revenue growth at 14 per cent to $3.2bn. Analysts had been expecting a 20 per cent rate which would have taken the top line to $3.4bn.
'This is important because Uber's investment case is based on the thesis that the continuous net losses don't matter because it's still a growth company, and its pathway to profitability is through market domination and, of course, revenue growth.
Uber tears up - in adjusted terms - US$656 million in a three-month period, but the real bummer is a modest slowdown in revenue growth.
Talk about skewed priorities.
But that tells you all you need to know about the 'value' proposition associated with these so-called unicorns.
As long as it's a 'growth' story, we'll keep placing an over-over-over inflated price to these perpetual cash burners.
The punters expressed their disappointment with Uber's slowdown in revenue growth. Shares in the ride-sharer fell almost 25%.
When it comes to value, I'm a little old school. Just to humour myself, I had a look at what the US 10-year government bond was yielding in May 2019. The rate was 2.4%.
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