OT: Lyft and Uber IPOs

[fiamme red]

Both companies are deep in the red. Lyft lost $911 million and Uber lost $1.8 billion in 2018. Neither company has any indication that it's ever going to be profitable. Yet their valuations have been shooting up recently.

Can someone who understands finance explain the frenzy over these IPOs?

[unterhausen]

greater fool theory?

[fmradio516]

weird. I would have thought they were doing good. What happened?

[bicycletricycle]

I do not know why exactly but it is relatively easy to find a bunch of strange companies like this. I guess people believe in their potential for the future?

Originally Posted by fiamme red

Both companies are deep in the red. Lyst lost $911 million and Uber lost $1.8 billion in 2018. Neither company has any indication that it's ever going to be profitable. Yet their valuations have been shooting up recently.

Can someone who understands finance explain the frenzy over these IPOs?

[joosttx]

Originally Posted by fiamme red

Both companies are deep in the red. Lyst lost $911 million and Uber lost $1.8 billion in 2018. Neither company has any indication that it's ever going to be profitable. Yet their valuations have been shooting up recently.

Can someone who understands finance explain the frenzy over these IPOs?

Contractor and home prices have been shooting up too in the Bay area.

[Peter P.]

Uber and Lyft will make up for their losses-in volume!

[Llewellyn]

Originally Posted by unterhausen

greater fool theory?

This

[nooneline]

isn't the business plan to achieve a monopoly by being able to lose money the longest, starve your competitors out of business, and then jack up the prices once there are no longer any viable alternatives?

Rideshare services are bad for cities. They increase traffic, increase transit times, and slow down transit. I hope they go out of business, and I hope we get over them.

[tuscanyswe]

They are also bad for the ppl they employ with low wages uncertain hours etc. Then when monopoly is achieved they can raise the prices and increase the salory for the ... hmm its likely not human drivers by then ha.

[echappist]

Originally Posted by fiamme red

Both companies are deep in the red. Lyst lost $911 million and Uber lost $1.8 billion in 2018. Neither company has any indication that it's ever going to be profitable. Yet their valuations have been shooting up recently.

Can someone who understands finance explain the frenzy over these IPOs?

The supposed long-term upside is that they'll be the first(s) in the autonomous driving sector, thus making it unnecessary to have a driver (and just a caretaker would suffice) and driving down the personnel cost. However long down the road that is, no one knows.

That's the assumption at least. Whether that comes true is a separate issue.

The saying goes, "the market can remain irrational longer than you (that is to say, an investor, in particular, someone shorting the market) can remain solvent." Would be interesting to see if the market can remain irrational longer than the company can remain solvent.

FWIW, facebook did not have a positive P/E ratio when it first went public. Whether these two could do something similar is a different story.

[MattTuck]

Originally Posted by echappist

The supposed long-term upside is that they'll be the first(s) in the autonomous driving sector, thus making it unnecessary to have a driver (and just a caretaker would suffice) and driving down the personnel cost. However long down the road that is, no one knows.

That's the assumption at least. Whether that comes true is a separate issue.

The saying goes, "the market can remain irrational longer than you (that is to say, an investor, in particular, someone shorting the market) can remain solvent." Would be interesting to see if the market can remain irrational longer than the company can remain solvent.

FWIW, facebook did not have a positive P/E ratio when it first went public. Whether these two could do something similar is a different story.

Jim has it pretty much right.

Here's another resource. Damodaran has a bunch of youtube videos on Uber also.

http://aswathdamodaran.blogspot.com/...aring-ipo.html


I'm skeptical of the valuation, and skeptical of the "mobility as a service" concept -- except in cities, and even then, I think you're going to see higher costs passed onto drivers/passengers in the future.

That said, we're living in a time of delusional optimism, so high valuations don't really surprise me.

[vincenz]

They’re really the only major players in the space, especially in the US. Valuation is how much a company is worth based on what people are paying for percentages of it, no? Doesn’t mean it’s really worth that much today, more a reflection of potential.

48% of ALL internet traffic is on mobile devices now. It’s really a world built for companies like Uber and Lyft to shine.

[1centaur]

Originally Posted by fiamme red

Both companies are deep in the red. Lyst lost $911 million and Uber lost $1.8 billion in 2018. Neither company has any indication that it's ever going to be profitable. Yet their valuations have been shooting up recently.

Can someone who understands finance explain the frenzy over these IPOs?

May I suggest that this might be a mix of near-money-making and money-losing businesses that average money-losing but that have a ramp pattern on the near-money-making businesses that can be extrapolated to the less ramped businesses in a way that implies tremendous profit is possible. Further, the "network effects" of size may create a moat that is impossible to overcome, in that if an Uber is always near at hand because it is so big and an arriviste is hit or miss, Uber will get the summons and thus solidify near monopoly power? I suspect that is the theory. The value of the potential near monopoly as the world transitions to autonomous driving is an interesting question, but maybe not a relevant one for a decade in the US and longer in much of the world. A lot of spreadsheet projections behind this story.

[verticaldoug]

These companies ultimately have regulatory risk as lawmakers focus on contractor abuse. If they can get an exemption for Assembly Bill 5 in California which focuses on some of these Gig abuses, then maybe they are already too big to fail. If not, they will take a hit as other communities/states will follow. (i.e. London) It's a bit like how some companies in the UK abused employees with modified zero-hour contracts for employment. (horrible concept)

On a side note, Travis Kalanick is good at finding legal loopholes to exploit to profit. It maybe that he just doesn't give a **** about anyone else besides himself and views laws as a mere nuisance.

He is now behind a lot of the Dark Kitchens in London with a venture called CloudKitchens. BBC Panorama recently had a program on these dark kitchens and how they cut the regulatory food safety corners.

Awesome

Final side note, I hope WeWork hurries up and lists so I can short it.

[Ralph]

My view as an investor.....Most of the buyers of the IPO are hoping they can sell it to someone else at a higher price. For most....it's not about fundamentals. Just speculation.

If it comes back to earth....maybe $15-$20. I might take a good look. The current version of these companies (using drivers) is only the first generation. IMHO The future of driverless transportation in urban areas is bright.....just not sure if these pioneers will be the ones who succeed and profit. Might be Ford and GM....who are heavy investors in these companies. They gotta sell vehicles somehow.