Former Uber (NYSE:UBER) CEO Travis Kalanick has left the building and is selling out his stock as fast as he can.
Despite a series of scandals, Kalanick’s fortune is now estimated at $2.5 billion, most of it in cash. The company released an anodyne statement saying he wanted to focus on philanthropy and new endeavors, like renting kitchens to chefs for delivery businesses.
Kalanick’s deserting a sinking ship. Since going public in May 2019, Uber has lost over 28% of its value. The company continues to lose money, on a cash flow and operating basis. It still sells for about four times revenue, opening for trade Jan. 2 at $29.11 per share, a market capitalization of $51.1 billion.
Kalanick may be getting out because he has great new ideas for the 2020s. Or he may be getting out while the getting’s good.
Where’s the Value?
Kalanick’s successor, former Expedia (NASDAQ:EXPE) head Dara Khosrowshahi, has tried to clean up the mess Kalanick made but has been unable to staunch the financial bleeding.
Over the first three quarters of 2019 Uber lost over $7 billion, on revenue of about $10 billion. Free cash flow has been a negative $3 billion. Another loss, of 69 cents per share, or $1.2 billion, is expected when it next reports earnings.
Khosrowshahi has bought Uber time, however. Uber ended September with $12.6 billion in cash, almost twice what it had at the start of the year.
Uber has been able to settle the sexual harassment claims against Kalanick’s regime for relative pennies. Khosrowshahi has been able to distract investors from Uber’s losses with Uber Eats, its food delivery service. While people think of Uber as a quintessentially American operation, it’s global.
Uber is known as the exemplar of the “gig economy,” where workers have no protection or benefits because they’re “contractors” rather than employees. But it didn’t invent this business model. Journalism did, as California learned after it passed Assembly Bill 5, a law designed to rein-in Uber. Uber’s suit against the law may have little legal merit, but it’s a stellar public relations move.
Uber’s Feudal Economy
Meanwhile, Uber has become a symbol for the noblesse oblige that can occur in a feudal system.
A female driver in Atlanta is being treated like Cinderella because a passenger paid off the loans on her associate’s degree. Another driver saved an epileptic passenger’s life using their smartphone contacts. Actions like these, and blowback against AB5, are giving Uber positive publicity as it fights airport fees or restrictions on where its cars drop off and pick up passengers.
But Uber’s model eliminates protections placed over a century by local and federal regulators. Over 3,000 sexual assaults have taken place in Uber cars, according to Uber. The rate of fatal accidents is half that in typical driving. But non-fatal crashes, like one that injured comics Dana Gould and Bobcat Goldthwait on their way to play before me at a recent Atlanta show, aren’t counted.
The Bottom Line on Uber Stock
Khosrowshahi has little financial room to maneuver. But he must find a way to change current trends if the company is going to survive.
The knock-on impact of failure would mean trouble for more than Uber. Hundreds of thousands of new cars are being sold to Uber drivers every year. The gig economy is also keeping the unemployment rate low.
I wouldn’t take Uber stock on a bet. But it’s more important to note how it’s the canary in the coal mine of the current economy, and it’s singing a sad, sad song.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time available now at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story.