Uber is losing more than $1bn a quarter, according to recently released financial statements. Will the US ride-hailing company stagger through the saloon doors of the stock market without having to raise yet more money from private shareholders?
Another private cash call could be awkward. Uber has already raised an astonishing $22bn. It can count on more support from the SoftBank Vision Fund. This is managed by the Japanese tech and telecoms group but funded by sovereign wealth funds.
The economics of the last round were farcical. SoftBank paid existing investors a price that implied Uber’s market worth was $48bn. The price it paid for new shares supported a valuation of $68bn. The gap was embarrassing and needs to close before a float, which Uber has pencilled in — optimistically perhaps — for next year.
Cash flow paints a rosier picture than the income statement. Uber has almost $6bn of cash and burnt a paltry $109m during the fourth quarter of 2017. Last week, Uber boss Dara Khosrowshahi said the company is covering its overheads in developed markets. If it were not planting flags abroad and investing in expensive autonomous vehicle technology, it would be profitable.
Shareholders should discount such bullishness with negatives reflected in statutory numbers. Other companies might get away with ignoring large legal costs connected to the now-settled court battle with Alphabet. Investors in Uber, with a myriad of continuing legal threats, cannot view such charges as one-offs. The $6bn of cash includes $1.2bn of restricted money, set aside for insurance purposes, which cannot fund Uber’s lossmaking expansion.
Uber’s developed economy businesses might cover the company’s overall costs, but the lossmaking areas are not entirely optional. The robo vehicles project, for example, is vital to eventually squeezing out drivers to give Uber the margins needed to support its $70bn valuation. Even so, the business should be able to come to market without more private funding.
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