Why I wouldn’t panic about Uber’s lackluster IPO – Washington Examiner

Uber’s initial public offering proved a gigantic bust. On Friday, the ride sharing company took the largest financial hit of any American company, and its stock plummeted by roughly 10%. Leftist activists and the Gizmodo contingent of tech foes cheered at the ride sharing company’s dismal IPO, but for a number of independent reasons, I wouldn’t be so sure that Uber’s IPO spells a death knell for the firm.

First, as a matter of pure circumstance, Uber’s timing was bad. Trade talks with China have been frenetic at best, leaving markets on edge. The Dow Jones Industrial Average has plunged by more than 600 points in the past week, and Monday proved the worst day this year for the Nasdaq composite. All eyes were on Uber for obvious reasons, but other stocks took significant hits.

Then there’s the sheer numerical factor. Despite its stock crash, Uber still managed to raise more than $8 billion from its IPO, rendering it among one of the top ten American IPOs of all time. Sure, Uber may have missed expectations and performed less well than the average tech company which pops from its IPO, but it still objectively performed somewhat well.

But most importantly, Uber is not profitable now. It probably will be shortly. Ride-sharing business models have always made long-term strategic sense. The number of households that own either no cars or have downsized the number of cars they’ve owned has exploded over the past decade in urban areas, and Uber has always made two bets: first, that Americans would gradually embrace using Uber rather than owning multiple cars per household, and second, that they can dominate the self-driving car industry.

Uber has a flaw that Amazon, another blockbuster firm that spent most of its first decade in the red, did not. Whereas Amazon could cut costs by removing the cost of physical facilities and human labor, Uber still requires human drivers, who need to make a profit on top of gas and the costs of maintaining a car. But none of that will matter if Uber’s self-driving car gambit pays off. And that may be sooner than you think. Self-driving cars don’t have to have a 100% success rate. They just have to have fewer accidents than humans on average in order to ethically justify the transition.

Besides, as Recode has noted, Lyft, which is arguably less profitable than Uber given its market control, would have turned a profit last year if they didn’t spend money on research, development, sales, and marketing. Considering that Uber has spent tens of millions of dollars per month, that’s no small feat.

There’s no security in the market, and it’s possible that Uber goes up in flames. But given the circumstances at play, it seems likely that rumors of Uber’s demise are greatly exaggerated.


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