Uber debuted as a publicly traded company with a market valuation worth twice as much as Ford despite the fact that the ride-sharing service is a money loser.
So Uber went public last Friday. That doesn’t mean a whole lot to regular people--just because there are a bunch of Wall St. fat cats bidding on little bits of imaginary corporate ownership doesn’t change the price of a ride downtown. But it does put into sharp relief some pretty insane facts about the financial world.
First, we have to talk about an uncomfortable fact: most gig-economy companies are unprofitable. The Washington Post recently ran a piece that confirmed neither Uber, Lyft, or any of the other ride-sharing services actually make money. In fact, of all the gig-economy services out there, only Airbnb is profitable.
What this means, as the article puts it, is that "Uber and Lyft charge less per ride than what it costs them to provide it."
You don’t have to be an economist to know that if you charge less for a product than it costs you, you’ll eventually run out of money and go bankrupt. That’s just basic Monopoly rules.
And yet, Uber debuted with a market valuation twice that of Ford. Uber began with a market cap of $82 billion, while Ford languishes at just $41.2 billion. Meanwhile, Ford actually makes and sells millions of vehicles every year while Uber offers software that charges less per ride than a taxi while hemorrhaging money like it’s got the financial equivalent of Ebola.
Worse still, Uber has no plan to actually make money. According to their IPO documents (courtesy of Jalopnik):
"We have incurred significant losses since inception, including in the United States and other major markets. We expect our operating expenses to increase significantly in the foreseeable future, and we may not achieve profitability."
To be fair, Uber’s stock dropped sharply after it started being traded on Friday, losing 8% of its value in a single day. But that could just as easily have been explained by the ongoing trade war with China that’s putting a damper on literally every stock price this side of the Pacific.
Meanwhile, Uber drivers went on strike on Wednesday to protest the fact they don’t make a living wage. That’s just 2019 for you.