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Comment by bostonsre | Hacker News Reader

Do they still lose money on every ride they give? I've been skeptical for a while now, it's a ponzi scheme.

For the last time, not everything that's not everything that's a bad financial proposition == ponzi scheme. At what point have new drivers ever paid the wages of old drivers?

Uber drivers have always done ok in the short term, new or old, it's Uber that loses money on every ride. And if the drivers are not coming out ahead long term due to maintenance costs, that's not affecting newer drivers any more than older drivers.

I don't understand why you are going into driver wages. I'm completely fine with their drivers making good money, but if they lose money on every ride, it doesn't sound like a good business.

What makes it a ponzi scheme is that the initial investors and the people that run it knew they couldn't possibly make money and yet they were able to get tons of investors to pour capital into a business that couldn't make money. New investors aka public markets paid out the old investors aka venture capitalists.

No, according to the latest report, rides have been profitable[0] (@ +544M in the last quarter). Deliveries are still in the red, but only barely (@ -12M, up from -183M from previous quarter). "Losses" largely come from G&A/R&D.

[0] https://techcrunch.com/wp-content/uploads/2021/11/Screen-Sho...

That's just creative accounting. Uber actually incurred a $2B loss, but for some reason they insist on ignoring expenses when calculating their "profits".

The loss last quarter was mostly ($2.5B) a mark-to-market write down of their stake in Didi, which they have not sold.

The 2B "loss" was a downswing of Didi stock, which Uber has a big stake on; AFAIK Uber didn't actually liquidate that position, so it's more of a paper money loss. See [0]

As for "creative accounting", pretty much everyone in this industry segment uses EBITDA. That's the language investors and media use to talk about earnings calls for not just Uber, but also Lyft, Doordash, etc. If you want to make a case for why GAP analysis would make more sense vs EBITDA given the maturity of the industry, I suppose a more elaborated argument is in order?

[0] https://www.investopedia.com/terms/m/mark-to-market-losses.a...

I agree with the gist of you're saying, and I didn't personally dig into their last few fillings, but I suppose what the parent comment is trying to express can also be stated as "Uber's core ride-sharing business model is not cash flow positive", which can be obfuscated when arguing GAP vs EBITDA.

Yeah, I get the insinuation and I'm responding to that: ignoring for a moment the thing about the proper definition of a ponzi scheme (sibling threads already go into that), the claim is more or less that Uber's business model bleeds cash unsustainably on core verticals to capture investor endearment, but that cash is limited and the party has to come to an end.

What I'm pointing out is that a) the argument about "duping investors" doesn't really make any sense anymore now that Uber is a public company (since raising VC rounds by giving them paper equity is no longer really a thing), b) the balance sheet numbers have been trending towards positive cash flow (and fairly aggressively, at that), even despite a pandemic that could accurately be described as the worst thing that could possibly happen in this industry segment and c) the core vertical (rides) is actually cash flow positive and funding other parts of the business.

Thank you for the informative reply. I definitely agree on all counts, especially re "ponzy" etc. I think that the pandemic forced the entire sector to focus on profitability and cut most loss-leading initiatives, so hearing they're trending towards core profitability makes sense!

Just to be clear, Uber has never been profitable even on an EBITDA basis. This right here says -$0.9 billion for the last quarter: https://www.macrotrends.net/stocks/charts/UBER/uber-technolo.... They use "Adjusted EBITDA" to try and say they're profitable, which is an attempt to remove non-recurring expenses. That is perfectly fair if they're really non-recurring, but it's also perfectly fair to be skeptical when there have been exactly zero quarters in over a decade now in which they have brought in revenue in excess of their expenses, even if they claim those expenses were unexpected.

I'll admit, I should've checked their Q3 numbers before, regarding the write-off, but they're nowhere near profitability even if you ignore that.

For example, in the table linked above, they've accounted for all revenues, but not attributed all of their expenses by segment. According to their filing their total loss from operations across all segments was $572M, however if you add up all their segments in the table, they come out to a $8M profit. That's what bothers me. If a company has 3 segments that generate 100% of its revenue, how can it claim that $600M in operating expenses shouldn't be attributed to any of those segments, thus making one of those segments profitable.

I think everybody in the industry segment uses the same sketchy metrics because they are also terribly unprofitable.

Yeah, that's actually a pretty good point. Personally, I don't really pay that much attention to profitability of individual verticals because I hold similar opinions on cost attribution, but then again, I'm no accounting expert, so I don't know if my opinions are actually correct.

I think the narrative people are pushing about bleeding money on every ride is too simplistic though. I could definitely get behind an argument that, for example, driver incentives ought to be bucketed under mobility, but on the other hand, attributing a Didi valuation fluctuation to a business vertical is obviously silly. Personally, I'm not convinced that there are enough "hidden" losses in misc categories that are "rightfully" attributable to mobility to offset the Q3 performance, and my understanding is that many analysts are bullish on Uber right now because they see the trend in these metrics, adjusted as the metrics may be. I guess we'll see what happens next year.

Please explain what you think a ponzi scheme is. Because losing money on something isn’t close to the definition

I think they mean it is sort of a ponzi scheme for those invested. It requires more and more investor money to operate and will eventually collapse leaving the last round of investors holding the bag while those that got in early may get out fine. I think the ponzi scheme is more an apt metaphor than the actual structure of the company?

A Ponzi scheme requires an element of fraud. Very difficult to tell me that building a global fleet of ride hailing and being transparent with the financials is a Ponzi scheme. The outcome might be similar (later investors bearing most of the losses) but that's more of an investor problem and not fraud.

They probably mean a Pyramid scheme. In regular use, Ponzi and Pyramid schemes are interchangeable terms because you need new money to stay afloat. Legally they're different because a Ponzi scheme requires lying about where the returns are coming from, but a Pyramid scheme can be entirely truthful about the finances.

It's more of a funnel system where they take investor $$ and channel that to employees and in discounts to customers.

Pyramid scheme is system where income is derived from recruitment of new investors. Ponzi scheme is centralized system where profits of old ones is paid with money of new ones.

VC start-up burning money to make things or subsidise customers in attempt to acquire them is neither.

I'm really starting to hate when these terms that have rather specific and well understood meanings are thrown at anything. If you want to call it something just say it is big scam. Scam really could be anything. Not specific thing.

It seems plausible that those leading the company thought there was no chance to turn a profit but we'll never really know. They have a vested interest in saying "everything is going great and the future looks great" no matter what.

In Ponzi scheme there is profits given out or at least reinvested... Start-ups just burning money and finding greater fool really isn't such scheme.

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