Uber Said to Raise $1.6 Billion in Convertible Debt to Expand
bloomberg.com
bloomberg.com
The reality is only 1 in 100 people are likely capable of building a great startup (in the PG sense of "Startup") that succeeds - but there is a huge part of the population that can build out a brick and mortar traditional company.
To put things into perspective, On the App Store, about 3,000 of the 1mm or so apps are capable of supporting a developer in the United states with the Median US Income ($53,800/year).
They are quite sizeable so would be interested if Uber is even making a profit.
I count 680 open positions in 145 unique locations posted there. Pretty impressive.
The bond Uber placed with Goldman Sachs’ private clients is a six-year bond that will convert into equity at a 20 percent to 30 percent discount to Uber’s valuation at the time of an initial public offering. ... The convertible bond carries a coupon that increases over time if Uber hasn’t gone public within 4 years.
The distinction between debt and equity is diminishing. Traditionally, debt has no upside, and in exchange, creditors are paid ahead of equity holders in bankruptcy. Convertible debt is secured debt if things goes bad, and equity if things go well. So, no matter what happens, convertible debt holders are at the head of the line.
They even get to deduct the interest paid up to the conversion. Then it's a long term capital gain. This is an argument for ending the deductibility of interest.
The question is, if Uber is so great, why do they need to raise so much cash? It's not an inherently expensive business to run. They don't hire the drivers or buy the cars. Uber is just an app, a scheduling back end, and a marketing operation. Is it that the original funders want to cash out?
Except for lobbying in almost every theater of operation they enter.
Not really--if interest rates decline (either in the overall economy or if a bond's issuer is seen as becoming less risky), the value of a bond will go up. The 10 Year US Treasury bond increased by over 10% last year, for example.
Also I agree with you about ending the deductibility of interest (for other reasons as well), but I'm not sure why you say the distinction between debt and equity is diminishing--convertible debt has been around for a long time.
"Traditionally", perhaps, but, "tradition" aside, one upside relates to priority of claims against assets in the event of bankruptcy/dissolution/etc.
The fact is that government regulators will end up banning Uber in most countries. You can't continue to operate outside the law flouting vital safety regulations that protect the interests of consumers for long.
And whilst Uber is popular in the US outside it still isn't a well known brand and what they do know is the questionable behaviour of its management team (there have been media reports). So I don't see them disrupting taxi services around the world to the same extent as the US.
What's the point for an European city to change regulation?
In a given year, the number of taxi jobs is pretty much fixed. The number of Uber (or generally, non-regulated) drivers is not.
In the not-so-far future, that resistance will be broken by the introduction of the robotaxi. Ueber will be spearheading that one. Too capital intensive for the current "big" taxi companies in the medium term. Too automated for the regulators to defend the taxi drivers working conditions.
That is, it seems to me like the places fully self-driving cars will initially be most successful is places where access is limited or "messiness" is minimized - places like highways, where you could even have "self-driving car only" lanes - a huge boons for long commutes. In cities, though, there are a lot of Really Hard Problems, that from what I've read engineers are not even close to being able to solve, things like:
1. Following detour signs 2. Following a street cop when they are contradicting stoplights or other road rules. 3. Dealing with construction signs in traffic, like when a construction worker has those signs they flip back and forth between "stop" and "go" (or heck, they just drop the sign and wave you by). 4. Knowing the difference between stopped traffic where you should wait (i.e. traffic is just really slow) or move around (i.e. someone is unloading).
That is, it seems like the state-of-the-art will allow self-driving ASSISTED vehicles in the pretty near future, but completely self-driving vehicles, that can handle all the complex, messy urban situations that people can, is not on the near horizon.
Things like standardized signs for cars to process and construction workers to hold would already solve 3/4 of the problems you've already mentioned.
Invest in customer service. There has to be a way to train people to be better drivers.
I am shocked.