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Can Uber Ever Deliver? - Uber’s IPO Prospectus Overstates Its 2018 Profit Improvement by $5 Billion

jocker12

Well-Known Member
Article - https://www.nakedcapitalism.com/2019/04/hubert-horan-can-uber-ever-deliver-part-nineteen-ubers-ipo-prospectus-overstates-its-2018-profit-improvement-by-5-billion.html

Uber’s S-1 not only fails to present any credible evidence about future potential profits, but its presentation of historical results is designed to mislead potential investors about recent improvements that did not actually occur.

Uber’s S-1 does not provide any information that would help investors understand driver economics, or the relative profit performance of Uber’s different ongoing businesses.


Uber’s S-1 data does not allow outsiders to evaluate the current profitability or the profit trends of any of Uber’s lines of business (car service, food delivery, scooters, etc.). It does not allow outsiders to evaluate whether observed revenue changes are due to pricing or demand or competitive changes, or to understand whether pricing or other marketing changes increased or decreased operating losses. As already noted, outsiders have no way of knowing whether there are significant differences in revenue per trip or profitability by country or by markets within countries, and no way of evaluating what factors might drive those differences.

Uber’s business model depends on a massive number of allegedly “independent” drivers. Uber’s S-1 provides no information (such as base and incentive earnings, turnover, driving patterns, utilization rates, costs of acquiring new drivers) relevant to whether they can continue to provide the capacity that Uber’s customers are paying for. Prospectus readers have no idea whether how driver take-home pay compares to minimum wage levels or alternative low wage jobs, or how much driver compensation has declined. Prospectus readers can’t tell how Uber changed base and incentive compensation in response to marketplace challenges (such as the terrible publicity Uber received in 2017, or local market share battles) or whether Uber has any potential to reduce the driver share of passenger fares going forward. Prospectus readers have no idea what portion of drivers work very long hours, what portion only work during demand peaks and what portion only work occasionally, and have no idea whether these driver patterns align with demand patterns.

Uber’s S-1 provides absolutely no data on operational efficiency. Its claims about synergies and scale/network effects are completely unsubstantiated. It says, “Our strategy is to create the largest network in each market so that we can have the greatest liquidity network effect, which we believe leads to a margin advantage” and that synergies “across our platform offerings …effectively lower our costs and allow us to invest in a scalable way that becomes increasingly efficient as we grow with each new product or offering.” But Uber fails to provide any supporting evidence about productivity gains or actual margin improvements.

The S-1 highlights the importance of “technologies” that allow better matching of supply and demand and more optimal pricing. But it makes no effort to demonstrate whether these technologies are any better than tools used by other companies and presents no evidence showing that the alleged better matching of supply and demand actually reduced unit costs or how its sophisticated pricing systems actually increased unit revenues. Although Uber’s entire legal defense of its “independent contracting” model is that it is a software company and not a transportation provider, the prospectus does not even pretend that it is a software company.

Uber’s claims of powerful network effects are nothing more than the assertion that some drivers can carry both passengers and food deliveries and that “Uber Eats is used by many of the same consumers who use our Ridesharing products.” Uber has no evidence that its platform increases the loyalty of either drivers or customers. The most likely explanation for the rapid recent growth of Uber Eats is not that customers are locked in to an app they like, but that customers got the same massive subsidies that drove the early growth of Uber’s car service. Airline passengers also buy hotel rooms and rental cars and restaurant meals But airlines understand that the synergies of combining these products within a single smartphone app owned by a single corporate entity are trivial.

Uber has internal data that could address all of these efficiency, pricing and margin questions in great detail. One can reasonably presume that they chose not to include any of it in the IPO prospectus because it would raise serious doubts about the company’s future growth and profit potential.
 

goneubering

Well-Known Member
Article - https://www.nakedcapitalism.com/2019/04/hubert-horan-can-uber-ever-deliver-part-nineteen-ubers-ipo-prospectus-overstates-its-2018-profit-improvement-by-5-billion.html

Uber’s S-1 not only fails to present any credible evidence about future potential profits, but its presentation of historical results is designed to mislead potential investors about recent improvements that did not actually occur.

Uber’s S-1 does not provide any information that would help investors understand driver economics, or the relative profit performance of Uber’s different ongoing businesses.


Uber’s S-1 data does not allow outsiders to evaluate the current profitability or the profit trends of any of Uber’s lines of business (car service, food delivery, scooters, etc.). It does not allow outsiders to evaluate whether observed revenue changes are due to pricing or demand or competitive changes, or to understand whether pricing or other marketing changes increased or decreased operating losses. As already noted, outsiders have no way of knowing whether there are significant differences in revenue per trip or profitability by country or by markets within countries, and no way of evaluating what factors might drive those differences.

Uber’s business model depends on a massive number of allegedly “independent” drivers. Uber’s S-1 provides no information (such as base and incentive earnings, turnover, driving patterns, utilization rates, costs of acquiring new drivers) relevant to whether they can continue to provide the capacity that Uber’s customers are paying for. Prospectus readers have no idea whether how driver take-home pay compares to minimum wage levels or alternative low wage jobs, or how much driver compensation has declined. Prospectus readers can’t tell how Uber changed base and incentive compensation in response to marketplace challenges (such as the terrible publicity Uber received in 2017, or local market share battles) or whether Uber has any potential to reduce the driver share of passenger fares going forward. Prospectus readers have no idea what portion of drivers work very long hours, what portion only work during demand peaks and what portion only work occasionally, and have no idea whether these driver patterns align with demand patterns.

Uber’s S-1 provides absolutely no data on operational efficiency. Its claims about synergies and scale/network effects are completely unsubstantiated. It says, “Our strategy is to create the largest network in each market so that we can have the greatest liquidity network effect, which we believe leads to a margin advantage” and that synergies “across our platform offerings …effectively lower our costs and allow us to invest in a scalable way that becomes increasingly efficient as we grow with each new product or offering.” But Uber fails to provide any supporting evidence about productivity gains or actual margin improvements.

The S-1 highlights the importance of “technologies” that allow better matching of supply and demand and more optimal pricing. But it makes no effort to demonstrate whether these technologies are any better than tools used by other companies and presents no evidence showing that the alleged better matching of supply and demand actually reduced unit costs or how its sophisticated pricing systems actually increased unit revenues. Although Uber’s entire legal defense of its “independent contracting” model is that it is a software company and not a transportation provider, the prospectus does not even pretend that it is a software company.

Uber’s claims of powerful network effects are nothing more than the assertion that some drivers can carry both passengers and food deliveries and that “Uber Eats is used by many of the same consumers who use our Ridesharing products.” Uber has no evidence that its platform increases the loyalty of either drivers or customers. The most likely explanation for the rapid recent growth of Uber Eats is not that customers are locked in to an app they like, but that customers got the same massive subsidies that drove the early growth of Uber’s car service. Airline passengers also buy hotel rooms and rental cars and restaurant meals But airlines understand that the synergies of combining these products within a single smartphone app owned by a single corporate entity are trivial.

Uber has internal data that could address all of these efficiency, pricing and margin questions in great detail. One can reasonably presume that they chose not to include any of it in the IPO prospectus because it would raise serious doubts about the company’s future growth and profit potential.
Uber’s prospectus is heavy on hype and light on details. Not surprising.
 

jocker12

Well-Known Member
  • Thread Starter Thread Starter
  • #6
I think Uber’s IPO will perform better than Lyft’s. The Uber brand will attract many international buyers and it has much higher revenue.
If it does better it’ll be a bigger crash.

From outside US, believe it or not, it’s much easier to spot a scam.

Is only the US that wants to believe when there nothing to believe in. And I am referring to believing Uber has some major growth potential. Because it does not.
 

goneubering

Well-Known Member
If it does better it’ll be a bigger crash.

From outside US, believe it or not, it’s much easier to spot a scam.

Is only the US that wants to believe when there nothing to believe in. And I am referring to believing Uber has some major growth potential. Because it does not.
Uber had about $50 billion in revenue last year and it’s growing. Lots of investors will be impressed.
 
If it does better it’ll be a bigger crash.

From outside US, believe it or not, it’s much easier to spot a scam.

Is only the US that wants to believe when there nothing to believe in. And I am referring to believing Uber has some major growth potential. Because it does not.
When asked if Uber would ever turn a profit, Travis Kalanick said "Sure, if we don't have to pay drivers..."
 

No Prisoners

Active Member
Article - https://www.nakedcapitalism.com/2019/04/hubert-horan-can-uber-ever-deliver-part-nineteen-ubers-ipo-prospectus-overstates-its-2018-profit-improvement-by-5-billion.html

Uber’s S-1 not only fails to present any credible evidence about future potential profits, but its presentation of historical results is designed to mislead potential investors about recent improvements that did not actually occur.

Uber’s S-1 does not provide any information that would help investors understand driver economics, or the relative profit performance of Uber’s different ongoing businesses.


Uber’s S-1 data does not allow outsiders to evaluate the current profitability or the profit trends of any of Uber’s lines of business (car service, food delivery, scooters, etc.). It does not allow outsiders to evaluate whether observed revenue changes are due to pricing or demand or competitive changes, or to understand whether pricing or other marketing changes increased or decreased operating losses. As already noted, outsiders have no way of knowing whether there are significant differences in revenue per trip or profitability by country or by markets within countries, and no way of evaluating what factors might drive those differences.

Uber’s business model depends on a massive number of allegedly “independent” drivers. Uber’s S-1 provides no information (such as base and incentive earnings, turnover, driving patterns, utilization rates, costs of acquiring new drivers) relevant to whether they can continue to provide the capacity that Uber’s customers are paying for. Prospectus readers have no idea whether how driver take-home pay compares to minimum wage levels or alternative low wage jobs, or how much driver compensation has declined. Prospectus readers can’t tell how Uber changed base and incentive compensation in response to marketplace challenges (such as the terrible publicity Uber received in 2017, or local market share battles) or whether Uber has any potential to reduce the driver share of passenger fares going forward. Prospectus readers have no idea what portion of drivers work very long hours, what portion only work during demand peaks and what portion only work occasionally, and have no idea whether these driver patterns align with demand patterns.

Uber’s S-1 provides absolutely no data on operational efficiency. Its claims about synergies and scale/network effects are completely unsubstantiated. It says, “Our strategy is to create the largest network in each market so that we can have the greatest liquidity network effect, which we believe leads to a margin advantage” and that synergies “across our platform offerings …effectively lower our costs and allow us to invest in a scalable way that becomes increasingly efficient as we grow with each new product or offering.” But Uber fails to provide any supporting evidence about productivity gains or actual margin improvements.

The S-1 highlights the importance of “technologies” that allow better matching of supply and demand and more optimal pricing. But it makes no effort to demonstrate whether these technologies are any better than tools used by other companies and presents no evidence showing that the alleged better matching of supply and demand actually reduced unit costs or how its sophisticated pricing systems actually increased unit revenues. Although Uber’s entire legal defense of its “independent contracting” model is that it is a software company and not a transportation provider, the prospectus does not even pretend that it is a software company.

Uber’s claims of powerful network effects are nothing more than the assertion that some drivers can carry both passengers and food deliveries and that “Uber Eats is used by many of the same consumers who use our Ridesharing products.” Uber has no evidence that its platform increases the loyalty of either drivers or customers. The most likely explanation for the rapid recent growth of Uber Eats is not that customers are locked in to an app they like, but that customers got the same massive subsidies that drove the early growth of Uber’s car service. Airline passengers also buy hotel rooms and rental cars and restaurant meals But airlines understand that the synergies of combining these products within a single smartphone app owned by a single corporate entity are trivial.

Uber has internal data that could address all of these efficiency, pricing and margin questions in great detail. One can reasonably presume that they chose not to include any of it in the IPO prospectus because it would raise serious doubts about the company’s future growth and profit potential.
Got it last night. Tweeted it to Mr. Wonderful, most CNBC regulars, my son at Goldman, and all former banking colleagues. By the time I woke up this morning was retweeted over 300,000 times.
Post automatically merged:

Advice to all real drivers. Click on trolls avatar and ignore. I've done that already to most trolls. Don't waste energy discussing with them. They're paid to disrupt and promulgate misinformation. They answer to the Borg. Assimilate resistance is futile.
 
Last edited:

goneubering

Well-Known Member
Got it last night. Tweeted it to Mr. Wonderful, most CNBC regulars, my son at Goldman, and all former banking colleagues. By the time I woke up this morning was retweeted over 300,000 times.
Post automatically merged:

Advice to all real drivers. Click on trolls avatar and ignore. I've done that already to most trolls. Don't waste energy discussing with them. They're paid to disrupt and promulgate misinformation. They answer to the Borg. Assimilate resistance is futile.
LOL

You’ve lost it. Claiming 300 thousand retweets??!!

Hahahaha!!
 

No Prisoners

Active Member
Just one of many tweets sent to multiple people. There different headings depending on recipient.
Post automatically merged:

Tweets started going out last night ans throughout the day today. Having so much fun.
Post automatically merged:

At 2 am to quintanilla at cnbc. Don't worry I'm not going to cop every tweet. But son told me that everyone in his office having a blast. If Lyft's short interest through the roof, uber's short interest will make history.
 

Attachments

Last edited:

jocker12

Well-Known Member
  • Thread Starter Thread Starter
  • #14
Just one of many tweets sent to multiple people. There different headings depending on recipient.
Post automatically merged:

Tweets started going out last night ans throughout the day today. Having so much fun.
Post automatically merged:

At 2 am to quintanilla at cnbc. Don't worry I'm not going to cop every tweet. But son told me that everyone in his office having a blast. If Lyft's short interest through the roof, uber's short interest will make history.
Anybody can see and listen to Hubert Horan

313071


talking to ABC News Australian journalists about past and present Uber, by watching the documentary posted here a month ago - https://uberpeople.net/threads/how-uber-outwitted-regulators-and-crushed-the-competition.316844/
 

No Prisoners

Active Member
This email went out Tuesday to all 120,000 employees of my former bank where I was for almost 20 years. My CFO forwarded it requesting to be shared with friends and families in all 36 countries.

"Uber's business model is futile. Its inherently flawed as it depends on a system of systematic reductions to fares paid to drivers and increasing the percentage kept by the platform. Therefore, most drivers quit within a year. The churning ratio is abysmal.

When riders pay surge pricing the amounts paid to drivers are not proportionate. Uber charges riders based on algorithm metrix data collected from passengers, battery power remaining location, data analytics collected. Uber is known for collecting all kinds of information through the rider app.

Imagine a utility company surging rates based on private data collected. The electric rates increase when exercising, a woman goes into labor, or a diabetic having a meal. Naturally body temperature rises so if the power company tracks your habits it knows when your body temperature rises and could price gouge you accordingly. This is not allowed for utility companies. Yet Uber gets away with implementing a form of price gouging system while undercutting drivers.

Unfortunately, riders see drivers as the culprit without realizing that Uber arbitrarily raises prices when passengers are most desperate. Yet drivers get a relatively small percentage.

Today most drivers are paid .60 per mile and .13 per minute while riders, when surging, pay astronomical rates to Uber. The irony is that after using drivers for its growth, Uber's ultimate goal is to displace drivers with autonomous vehicles. That is an atrocity.
 
uber triggers next crash & exposed as madoff 2.0 sounds right

not being able to profit on 20+ million rides a day, taking 50-90% of the fare while paying 1970s wages with no fuel, maintenance, depreciation, time costs is so comical that the scam even got this far

thinking 50+K self driving robots that arent even close to existing and having all costs os going to be cheaper than paying grandpa Simpson or apu $2-4 gross in a 10 year old 200+K less than 4K hoopty is equally comical

the fact not one journalist or news network hasn't published a story that .60 a mile is a cab rate from 1975 & all rides under 10 miles pay a 1971 minimum fare just lets me know everyone is in on the scam, it would take 1 reporter 1 hour of investigation to verify

be prepared its a cold world

for 3+ years ive figured this thing ends when one day no drivers can go online because all the servers are down & all calls lead to an office full of phones of the hook

its one thing if every now & then you didn't make $ on a ride but for years this market at least 90+% of them dont cover driver costs half the airport rides arent worth it anymore because half from the airport go downtown 20 miles but takes 40+ minutes & if its rush hour another hour to get home

there is no way everyone involved shouldnt be in prison another reason i know everyone in on it

#uberipostrike

uber-ipo-strike.jpg
 

goneubering

Well-Known Member
This email went out Tuesday to all 120,000 employees of my former bank where I was for almost 20 years. My CFO forwarded it requesting to be shared with friends and families in all 36 countries.

"Uber's business model is futile. Its inherently flawed as it depends on a system of systematic reductions to fares paid to drivers and increasing the percentage kept by the platform. Therefore, most drivers quit within a year. The churning ratio is abysmal.

When riders pay surge pricing the amounts paid to drivers are not proportionate. Uber charges riders based on algorithm metrix data collected from passengers, battery power remaining location, data analytics collected. Uber is known for collecting all kinds of information through the rider app.

Imagine a utility company surging rates based on private data collected. The electric rates increase when exercising, a woman goes into labor, or a diabetic having a meal. Naturally body temperature rises so if the power company tracks your habits it knows when your body temperature rises and could price gouge you accordingly. This is not allowed for utility companies. Yet Uber gets away with implementing a form of price gouging system while undercutting drivers.

Unfortunately, riders see drivers as the culprit without realizing that Uber arbitrarily raises prices when passengers are most desperate. Yet drivers get a relatively small percentage.

Today most drivers are paid .60 per mile and .13 per minute while riders, when surging, pay astronomical rates to Uber. The irony is that after using drivers for its growth, Uber's ultimate goal is to displace drivers with autonomous vehicles. That is an atrocity.
Sebastian Patron?
 

tohunt4me

Well-Known Member
Article - https://www.nakedcapitalism.com/2019/04/hubert-horan-can-uber-ever-deliver-part-nineteen-ubers-ipo-prospectus-overstates-its-2018-profit-improvement-by-5-billion.html

Uber’s S-1 not only fails to present any credible evidence about future potential profits, but its presentation of historical results is designed to mislead potential investors about recent improvements that did not actually occur.

Uber’s S-1 does not provide any information that would help investors understand driver economics, or the relative profit performance of Uber’s different ongoing businesses.


Uber’s S-1 data does not allow outsiders to evaluate the current profitability or the profit trends of any of Uber’s lines of business (car service, food delivery, scooters, etc.). It does not allow outsiders to evaluate whether observed revenue changes are due to pricing or demand or competitive changes, or to understand whether pricing or other marketing changes increased or decreased operating losses. As already noted, outsiders have no way of knowing whether there are significant differences in revenue per trip or profitability by country or by markets within countries, and no way of evaluating what factors might drive those differences.

Uber’s business model depends on a massive number of allegedly “independent” drivers. Uber’s S-1 provides no information (such as base and incentive earnings, turnover, driving patterns, utilization rates, costs of acquiring new drivers) relevant to whether they can continue to provide the capacity that Uber’s customers are paying for. Prospectus readers have no idea whether how driver take-home pay compares to minimum wage levels or alternative low wage jobs, or how much driver compensation has declined. Prospectus readers can’t tell how Uber changed base and incentive compensation in response to marketplace challenges (such as the terrible publicity Uber received in 2017, or local market share battles) or whether Uber has any potential to reduce the driver share of passenger fares going forward. Prospectus readers have no idea what portion of drivers work very long hours, what portion only work during demand peaks and what portion only work occasionally, and have no idea whether these driver patterns align with demand patterns.

Uber’s S-1 provides absolutely no data on operational efficiency. Its claims about synergies and scale/network effects are completely unsubstantiated. It says, “Our strategy is to create the largest network in each market so that we can have the greatest liquidity network effect, which we believe leads to a margin advantage” and that synergies “across our platform offerings …effectively lower our costs and allow us to invest in a scalable way that becomes increasingly efficient as we grow with each new product or offering.” But Uber fails to provide any supporting evidence about productivity gains or actual margin improvements.

The S-1 highlights the importance of “technologies” that allow better matching of supply and demand and more optimal pricing. But it makes no effort to demonstrate whether these technologies are any better than tools used by other companies and presents no evidence showing that the alleged better matching of supply and demand actually reduced unit costs or how its sophisticated pricing systems actually increased unit revenues. Although Uber’s entire legal defense of its “independent contracting” model is that it is a software company and not a transportation provider, the prospectus does not even pretend that it is a software company.

Uber’s claims of powerful network effects are nothing more than the assertion that some drivers can carry both passengers and food deliveries and that “Uber Eats is used by many of the same consumers who use our Ridesharing products.” Uber has no evidence that its platform increases the loyalty of either drivers or customers. The most likely explanation for the rapid recent growth of Uber Eats is not that customers are locked in to an app they like, but that customers got the same massive subsidies that drove the early growth of Uber’s car service. Airline passengers also buy hotel rooms and rental cars and restaurant meals But airlines understand that the synergies of combining these products within a single smartphone app owned by a single corporate entity are trivial.

Uber has internal data that could address all of these efficiency, pricing and margin questions in great detail. One can reasonably presume that they chose not to include any of it in the IPO prospectus because it would raise serious doubts about the company’s future growth and profit potential.
They have a " Target Investor Algorithm".
 

Attachments

mbd

Well-Known Member
Article - https://www.nakedcapitalism.com/2019/04/hubert-horan-can-uber-ever-deliver-part-nineteen-ubers-ipo-prospectus-overstates-its-2018-profit-improvement-by-5-billion.html

Uber’s S-1 not only fails to present any credible evidence about future potential profits, but its presentation of historical results is designed to mislead potential investors about recent improvements that did not actually occur.

Uber’s S-1 does not provide any information that would help investors understand driver economics, or the relative profit performance of Uber’s different ongoing businesses.


Uber’s S-1 data does not allow outsiders to evaluate the current profitability or the profit trends of any of Uber’s lines of business (car service, food delivery, scooters, etc.). It does not allow outsiders to evaluate whether observed revenue changes are due to pricing or demand or competitive changes, or to understand whether pricing or other marketing changes increased or decreased operating losses. As already noted, outsiders have no way of knowing whether there are significant differences in revenue per trip or profitability by country or by markets within countries, and no way of evaluating what factors might drive those differences.

Uber’s business model depends on a massive number of allegedly “independent” drivers. Uber’s S-1 provides no information (such as base and incentive earnings, turnover, driving patterns, utilization rates, costs of acquiring new drivers) relevant to whether they can continue to provide the capacity that Uber’s customers are paying for. Prospectus readers have no idea whether how driver take-home pay compares to minimum wage levels or alternative low wage jobs, or how much driver compensation has declined. Prospectus readers can’t tell how Uber changed base and incentive compensation in response to marketplace challenges (such as the terrible publicity Uber received in 2017, or local market share battles) or whether Uber has any potential to reduce the driver share of passenger fares going forward. Prospectus readers have no idea what portion of drivers work very long hours, what portion only work during demand peaks and what portion only work occasionally, and have no idea whether these driver patterns align with demand patterns.

Uber’s S-1 provides absolutely no data on operational efficiency. Its claims about synergies and scale/network effects are completely unsubstantiated. It says, “Our strategy is to create the largest network in each market so that we can have the greatest liquidity network effect, which we believe leads to a margin advantage” and that synergies “across our platform offerings …effectively lower our costs and allow us to invest in a scalable way that becomes increasingly efficient as we grow with each new product or offering.” But Uber fails to provide any supporting evidence about productivity gains or actual margin improvements.

The S-1 highlights the importance of “technologies” that allow better matching of supply and demand and more optimal pricing. But it makes no effort to demonstrate whether these technologies are any better than tools used by other companies and presents no evidence showing that the alleged better matching of supply and demand actually reduced unit costs or how its sophisticated pricing systems actually increased unit revenues. Although Uber’s entire legal defense of its “independent contracting” model is that it is a software company and not a transportation provider, the prospectus does not even pretend that it is a software company.

Uber’s claims of powerful network effects are nothing more than the assertion that some drivers can carry both passengers and food deliveries and that “Uber Eats is used by many of the same consumers who use our Ridesharing products.” Uber has no evidence that its platform increases the loyalty of either drivers or customers. The most likely explanation for the rapid recent growth of Uber Eats is not that customers are locked in to an app they like, but that customers got the same massive subsidies that drove the early growth of Uber’s car service. Airline passengers also buy hotel rooms and rental cars and restaurant meals But airlines understand that the synergies of combining these products within a single smartphone app owned by a single corporate entity are trivial.

Uber has internal data that could address all of these efficiency, pricing and margin questions in great detail. One can reasonably presume that they chose not to include any of it in the IPO prospectus because it would raise serious doubts about the company’s future growth and profit potential.
You should pull for U/l stocks to go up... better for the drivers... VC's eventually will stop funding... they need to cash out , so fund managers will buy shares and park it for years. They need to raise more $$$ by doing secondary offering next year. You can only do this in a up market.
 

goneubering

Well-Known Member
Article - https://www.nakedcapitalism.com/2019/04/hubert-horan-can-uber-ever-deliver-part-nineteen-ubers-ipo-prospectus-overstates-its-2018-profit-improvement-by-5-billion.html

Uber’s S-1 not only fails to present any credible evidence about future potential profits, but its presentation of historical results is designed to mislead potential investors about recent improvements that did not actually occur.

Uber’s S-1 does not provide any information that would help investors understand driver economics, or the relative profit performance of Uber’s different ongoing businesses.


Uber’s S-1 data does not allow outsiders to evaluate the current profitability or the profit trends of any of Uber’s lines of business (car service, food delivery, scooters, etc.). It does not allow outsiders to evaluate whether observed revenue changes are due to pricing or demand or competitive changes, or to understand whether pricing or other marketing changes increased or decreased operating losses. As already noted, outsiders have no way of knowing whether there are significant differences in revenue per trip or profitability by country or by markets within countries, and no way of evaluating what factors might drive those differences.

Uber’s business model depends on a massive number of allegedly “independent” drivers. Uber’s S-1 provides no information (such as base and incentive earnings, turnover, driving patterns, utilization rates, costs of acquiring new drivers) relevant to whether they can continue to provide the capacity that Uber’s customers are paying for. Prospectus readers have no idea whether how driver take-home pay compares to minimum wage levels or alternative low wage jobs, or how much driver compensation has declined. Prospectus readers can’t tell how Uber changed base and incentive compensation in response to marketplace challenges (such as the terrible publicity Uber received in 2017, or local market share battles) or whether Uber has any potential to reduce the driver share of passenger fares going forward. Prospectus readers have no idea what portion of drivers work very long hours, what portion only work during demand peaks and what portion only work occasionally, and have no idea whether these driver patterns align with demand patterns.

Uber’s S-1 provides absolutely no data on operational efficiency. Its claims about synergies and scale/network effects are completely unsubstantiated. It says, “Our strategy is to create the largest network in each market so that we can have the greatest liquidity network effect, which we believe leads to a margin advantage” and that synergies “across our platform offerings …effectively lower our costs and allow us to invest in a scalable way that becomes increasingly efficient as we grow with each new product or offering.” But Uber fails to provide any supporting evidence about productivity gains or actual margin improvements.

The S-1 highlights the importance of “technologies” that allow better matching of supply and demand and more optimal pricing. But it makes no effort to demonstrate whether these technologies are any better than tools used by other companies and presents no evidence showing that the alleged better matching of supply and demand actually reduced unit costs or how its sophisticated pricing systems actually increased unit revenues. Although Uber’s entire legal defense of its “independent contracting” model is that it is a software company and not a transportation provider, the prospectus does not even pretend that it is a software company.

Uber’s claims of powerful network effects are nothing more than the assertion that some drivers can carry both passengers and food deliveries and that “Uber Eats is used by many of the same consumers who use our Ridesharing products.” Uber has no evidence that its platform increases the loyalty of either drivers or customers. The most likely explanation for the rapid recent growth of Uber Eats is not that customers are locked in to an app they like, but that customers got the same massive subsidies that drove the early growth of Uber’s car service. Airline passengers also buy hotel rooms and rental cars and restaurant meals But airlines understand that the synergies of combining these products within a single smartphone app owned by a single corporate entity are trivial.

Uber has internal data that could address all of these efficiency, pricing and margin questions in great detail. One can reasonably presume that they chose not to include any of it in the IPO prospectus because it would raise serious doubts about the company’s future growth and profit potential.
This is why I say Uber should get out of India as quickly as possible but Dara says he wants to stay.

One of the major risk factors identified in the S-1 is that “Our business is substantially dependent on operations outside the United States, including those in markets in which we have limited experience” with 74% of total trip volume currently coming from outside North America. Footnote 2 notes that only 54% of Uber’s revenue comes from outside North America, suggesting that foreign market and competitive conditions substantially reduce average revenue per trip.
 
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