This is how this was supposed to play out and everyone here (on HN) knew that. The only people suckered were public investors during the IPO roadshow.
Uber's volume is 700% compared to last week. With volume-swings like that, there really isn't much you can do.
Run out of counterparties, and it becomes impossible to trade. Reality becomes evident at times like this when volume is way, way, way higher than anybody expects.
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I admit that I don't know what happened today with Uber, but we can't just assume "invisible hand / market is always perfectly efficient". Reality simply doesn't work like that.
The lockup period is a known event (nothing to be suprised about). The market already adjusted the stock price to reflect the anticipated insider cash out after the lock up.
Any rise or fall in the price at the specific time the lockup ends is because the reality is different than what the market anticpated.
The 90-day average volume for Uber is ~10-million shares per day. Lets pretend you knew that Uber was going to drop today (last week). How many shares do you sell short?
That 10-million average is ALL market trades, buying, selling, etc. etc. If 10-million shares were short-sold, it'd take a full day to cover all of those shares (based on average volume). There's only so much trading activity that happens at any given moment in time.
Well, what happened today? Uber is now up to... (check's Yahoo finance...) 95-million volume, and counting.
Huh. Well, I guess you could have sold more shares short last week. But given the 10-million share 90-day average volume, there was basically no way to predict 95-million shares traded before noon come Wednesday.
If you expected 2x or 3x the volume, you were proven wrong in the 1st hour. Between 9am EST to 10am EST, over 40-million UBER shares traded, representing ~400% of the average daily volume in just 1-hour.
What am I missing? For sure you couldn't know it would be 95 mil, but is 20 really that speculative?
Say you have $150k in savings and $x million in Uber stock. Any competent financial advisor is going to get you to diversify out of Uber. You'll miss upside, but prevent that $x million from potentially going to zero based on the actions of just one company.
Also... goodbye sf housing market :(
That ship sailed a while ago, no?
If in effect they are all going to compete with each other an other (mostly IT) millionaires for housing and pay slightly more, it doesn't seem like a real shift.
Agreed, but they seem to have no problem suggesting putting 50% of your net worth in a home.
Having been though a company going public, while that advice is correct, the endowment effect is a real thing, and it's shocking how long people hold on.
Uber has zero competence in fleet management. Everything they do is to avoid investing in a fleet.i would argue that rental car companies or car dealers are positioned much better.
It is completely crazy to expect large companies that are burning money to grow not to go after the largest markets just because it needs investment... Yet, that's what you described, and AFAIK you are completely correct.
Uber and Tesla are not anywhere close to directly comparable.
As far as I understand, Uber does some autonomous vehicles R&D, but the required tech advances will probably not be developed by them ?
After all of the pennies are counted, the cost to pave the way for the future where other companies take market share after the dust settles is astounding.
Had they rolled their 1st mover advantage into building and smoothering markets (think scooters) with IP locked autonomous taxis, a trillion dollar valuation would have been acceptable.
I don’t understand how you could interpret the charts that way. That seems like a talking point people parrot who have never looked at the numbers.
I mean, this is Tesla and Uber on the same timescale:
https://imgur.com/gallery/NOsh4b1
Certainly one of those companies has structural losses.
I do think Tesla is overvalued, but presents less risk than Uber. Ultimately, Tesla is looking to be a car company. $56B is a bit expensive for a car company, but there are examples. GM is $54B, Ford is $35B, Fiat Chrysler is $25B, Volkswagen is $100B, Toyota is $230B, Honda is $50B, Nissan is $27B, and Mazda is $6B. I think Tesla is overpriced because I think it's highly unlikely that they're the next Toyota. In 10 years, I think they might be the next Mazda or GM or Nissan or Honda - representing no gain to a significant loss over the next decade. Even if they become the next Volkswagen in 10 years, that would represent a less than 10% annualized return for something that's unlikely to happen. Even if one thinks Tesla is making a great product, the likelihood of becoming the next VW is very slim. Heck, Mazda makes some great cars and sells nearly 2 million, but they're only a $6B company.
But fundamentally, building cars and selling them for the amount of money people buy cars at is a reasonable proposition. Tesla's quarterly reports show that they can make them profitably and that the solar business is weighing on their financials. I can see Tesla being a profitable, sustainable company. They've proven out the economics of their batteries, drive-trains, manufacturing, etc. enough for me to believe there isn't an impediment to them continuing to exist indefinitely. I don't think they're going to justify their high valuation, but I can certainly see them becoming a Mazda, Nissan, or Honda - well respected, profitable, etc.
I mean, Tesla had $143M in GAAP net income in Q3.
However, I think there are big questions on whether Uber can stick around indefinitely. As states turn against the gig economy, does that wreck their business model? As self-driving seems many more years away, do they have the runway to keep going? Even with self-driving, are they the ones that will capture that market or will a company without the losses from a driver-oriented business take over that space? Will customers give a company like Uber margin or will they constantly be searching for the cheapest option?
I think the auto industry in general will face challenges over the next couple decades (another reason I'm less bullish on Tesla), but Tesla (at least its auto business) is fundamentally traditional. You give them tens of thousands of dollars, they give you a car. It might be an electric one with interesting new toys, but it's a traditional transaction and one that seems to provide good margin as the ramp-up costs start to wind down (launching an auto company takes a lot of time and money). Tesla is trying to convince people that they want to buy a Tesla rather than a Nissan. Uber is trying to convince people that they want to buy a lot more taxi rides and the only way to do that is by making them cheaper. Can they make that happen? Even if they make that happen, is there a barrier to someone else coming in and competing?
Please stop comparing Tesla with car companies. Tesla is a tech company, like Apple iPhone branch (which outlived, say, Nokia and Ericsson and Siemens). Most valuable part of Tesla is their IP and datasets. And don't forget their supercharger network.
Both are losing money overall, but this detail makes a lot of difference.
The reality is that they have three types of businesses. 1. Businesses that are slowing down dramatically, e.g. Ride Share. As they raise price it may have negative growth. 2. Businesses that are growing by unsustainable subsidy, e.g. Eats, Freight. 3. New business that are purely speculative. Uber Money, Autonomous, Flying Taxis.
They have no businesses that fit the fast growth + profitability. Dara is trying to balance the three categories above to pretend that it is happening.
I've never really understood this.
Their drivers do more than just drive, don't they? They also supply the cars, and deal with maintenance of those cars. If Uber switches to a self-driving fleet and ditches human drivers, who will own the cars?
If Uber owns or leases the cars, Uber will have to be dealing with maintenance. I suppose they could go to a model where people who have bought self-driving cars can let Uber use them when the owner does not need them, but then Uber has just replaced paying a zillion drivers with paying a zillion self-driving car owners.
So, assuming they go with the model where Uber is the one handling maintenance so they don't have to have a zillion pseudo-employees I don't see what would stop other companies from doing this better.
If Waymo wanted to go for that market, for instance, they have better self-driving technology, and could probably get integrated with the Google Maps app that is already on everyone's phone so they wouldn't have to convince people to download anything. Sure, Waymo doesn't currently have, as far as I know, anything set up for managing and maintaining a large fleet of cars...but neither does Uber.
Or what about the car makers? Many of them are working on self-driving, too. I could see some of them deploying self-driving taxi fleets, with maintenance handled through their dealers. This could become a new sales channel for them--new car to their taxi fleet for a couple years, then sold off as a used car which the buyer can be assured was well maintained and still has a good warranty.
Imagine your self-driving Audi/BMW/Mercedes/etc taxi dropping you off at home at the end of the day, and then presenting you with a report showing how much you used the service over the last year, how much it cost you, and how it would have been cheaper for you to have your own private self-driving car, and offering to sell you that very car. If you accept, the car drives back to the dealer, gets cleaned, inspected, tuned up, and drives back to your place to be waiting for you to take ownership the next morning.
In summary, owning and operating a fleet of self-driving taxis is sufficiently different from what Uber does now that I'm not sure that Uber has any particular advantage over anyone else who might want to do so, and might even be at a disadvantage, so I'm skeptical that this is their future.
Uber is banking on people not switching to whatever other self-driving service comes out, due to being a household name. I don't think very many people outside of SV know what Waymo even is, everyone has taken an Uber though.
If Waymo arrives with a more cost effective solution, that’s it.
I think you'd be surprised at Uber's profile outside of some relative bubbles. Pew Research last year said the number of Americans who have never taken an Uber has gone down but it's still something like 36%.
I live 40 miles outside of a major city and near a couple of smaller cities and Uber barely works for me during daytime hours. I couldn't begin to use it for an early morning airport run.
As the hype dies down so does Ubers market cap.
There will certainly be regulatory and liability issues to work through but if the tech were really ready for prime time I actually don't believe those those are showstoppers.
now that its a publicly traded company and its financials are transparent to investors, the free market is doing what it is supposed to do.
This is by far Uber's best trick. Convincing people that there is an end game they can win.
I see no way that self-driving saves them. Either they'll have to buy/lease/maintain a massive fleet of cars or they'll have to rent self-driving cars from the owners. Either way, in the near future, how much cheaper can it be than paying humans peanuts?
Their true value is their logistics software. If they would lease/sell that to other industries they would be rich beyond belief.
That's a lot less reflective of UBER and more reflective of the type of startups SV is trying to take public. Look at any other SV Unicorn that IPO'd...take Twitter that IPO'd in 2013, it turned a profit one year since going public.
Twitter isn't really a shining example of success either - their share price has been sideways for 6 years.
Market cap is not and has never been a good proxy for success.
I do find it amusing that I was called out on this, though, since in the past I've been called out for not including SF as part of SV.
That's less growth than Comcast has had over the same period. Which most would not consider a dynamic incredible stock.
Nah. Right now their business model relies on having their labor bring their own capital. I've always seriously doubted that cutting the labor out of the equation and replacing it with capital that Uber now has to furnish and maintain was going to save all THAT much money.
The numbers are all over the place, but from what I've been told once you factor in mileage costs, gas, and maintenance + cleaning of the vehicles most rideshare drivers are only earning somewhere from $1.50 to $3.00 an hour. If Uber then has to internalize all those costs plus add all the software maintenance/development costs of their self-driving AI how much is that saving them really? Is it going to be enough to defray the billion and a half dollars they're bleeding every year?
No, their long-term game was always going to be to undermine public transit and personal vehicle ownership through an artificially cheap business model and then once their monopoly (or oligopoly with Lyft) is firmly entrenched to boondoggle municipal governments into subsidizing rides for them instead of spending money on building out transit.
That is really post-Marx. It is a new economy structure enabled by technological progress, and which couldn't have existed and hasn't been predicted until it was enabled by technology and was created by Uber and the likes. In marxism, ie. in classic capitalism the capital owner extracts added value which is created by the labor applied to the capital. In the post-marxism economy the birth of which we're witnessing today Uber, by the owning of the information network, manages to extracts the added value which labor creates by applying itself to the labor's own capital. Marxism economical theory naturally postulates socialism after capitalism with the socialism being the maximum entropy of capital ownership distribution, and that is what we've observed in the last 100 years. These days with the rise of technology that got the post-Marx economy enabled the future driven by that economy isn't socialism, its the new fundamental state of society - the network.
So, you basically don't know most of the things what i was talking about. No wonder it sounds gibberish to you.