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May 2019

Monster Uber IPO still dogged by questions about company’s long-term viability

by Mike Beggs

It marked the largest Initial Public Offering since 2014 – the eighth largest ever – when on April 26 Uber Technologies set the terms for its’ long-awaited IPO, seeking a valuation of $91.5 billion.

On the heels of rival Lyft’s March 18 IPO, Uber aims to sell 180 million shares at $44 to $50 per share, raising over $9 billion.

As Quartz observed, it marked an incredible decade-long ascent, “from scrappy startup to $90-billion corporation”, trading on the New York Stock Exchange.

With the IPO, the notorious ridesharing behemoth released some mind-blowing numbers for 2018 -- no less than 10 billion trips generating revenues of $11.3 billion. But, Uber still reported an operating loss of close to $1 billion, leaving CEO Dara Khosrowshahi to suggest the company has “barely scratched the surface” in vast industries like food and logistics.

“Uber accounts for less than one percent of all miles driven globally,” he noted in a letter to investors.

But for all of its’ popularity among consumers, Uber continues to ward off adversity in the form of driver discontent, multifarious legal challenges, the alarming number of sexual assaults and other crimes committed by its drivers, and continuing complaints about its’ reluctance to release relevant data to governments and authorities.

Even by providing them with cash rewards of $2,500 to $10,000 coinciding with the IPO, the company could not appease its’ disgruntled drivers who have organized a 12-hour, seven-city strike for May 8 to demand better wages, benefits, and more transparency regarding pay practices.

Of the one-time bonus offered to them, driver/strike organizer Mostafa Maklad told Forbes, “It’s nothing compared to the billions the executives are going to make.”

He said, in San Francisco, most drivers are now working 70 to 80 hours a week to get by, made worse by a recent 25 percent pay cut.

In New York, driver wages have nosedived to $9.21 to $14 an hour, prompting The Big Apple to adopt the country’s first pay floor for ridesharing drivers in late 2018.

Meanwhile, drivers in California have an ongoing court challenge to get themselves reclassified as employees, and thereby eligible for a minimum wage, and benefits.

In its’ IPO filing, Uber acknowledged, “As we aim to reduce driver incentives to improve our financial performance, we expect driver dissatisfaction will generally increase.”

The Associated Press reports that, among the “Risk Factors” Uber laid out to prospective investors was the following, “Platform users may engage in or be subject to criminal, violent, inappropriate, and/or dangerous activity that may result in major safety incidents, which may harm our ability to attract and retain drivers, consumers, restaurants, shippers, and carriers.”

The company also stated that the sundry and various bad press from 2017 caused “hundreds of thousands” of Uber customers to quit the platform.

Lyft priced its’ IPO at $72 per share, with a valuation of approximately $24 billion. But, prices took a downturn, to a low of $54.35 a share by April 27, as market analysts questioned its valuation.

And, Lyft is dealing with a potential publicity setback of its own.

On April 24, the New York law firm of Levi & Korinsky, LLP issued an investor alert to all people who purchased common stock of Lyft Inc., in relation to the March 28 IPO. They advised investors that, “a securities action has been commenced in the Superior Court of California, and if you purchased Lyft common stock pursuant to the initial public offering your rights may be affected by this action.”

The complaint alleges that, “the Registration Statements representatives were materially inaccurate, misleading, and/or incomplete because they failed to disclose that: more than 1,000 of the bicycles in Lyft’s rideshare program suffered from safety issues that would lead to their recall. And secondly, Lyft’s claimed ridesharing market position was overstated. Accordingly, the price of the Company’s shares was artificially and materially inflated at the time of the Offering.”

And while, by and large, the riding public’s love affair with TNC’s continues, newspaper reports from across North America indicate some push-back against their oft-brazen way of doing business.

For example, in February, Portland Mayor Ted Wheeler slammed Lyft for lobbying the State of Oregon to prevent his city from regulating to manage its’ impact on safety, congestion, and the traditional taxi industry.

According to Oregonlive.com, in a terse letter to Lyft, he observed that while the company was a model participant in a TNC pilot project, he was “dismayed” to learn about Lyft’s efforts to get a bill passed to eliminate local consumer safety, and disability access protection for people who use TNC’s.

The proposed Bill would eliminate the ability of cities in Oregon from protecting TNC passengers by: requiring thorough background checks for TNC drivers; conducting field safety audits to ensure the vehicles are safe and reliable; conducting spot checks to verify drivers are who they say they are; and collecting local data, critical for understanding congestion, and climate impacts.

And while companies like Uber, Lyft, and Air B’nB have successfully disrupted their respective industries, a 2015 article in the San Francisco Chronicle detailed how these deep-pocketed technology companies have utilized monstrous lobbying efforts, and mobilized the mass support of their loyal users to besiege lawmakers with e-mails, tweets, rallies, petitions, and testimonials.

The Chronicle noted that TNC’s have systematically circumvented laws surrounding safety, insurance, and taxes, with the argument that, “20th Century rules need to be updated for their new ways of doing business.”

Oakville owner/operator Al Prior alleges that mega-corporations like Uber, Facebook, Google, and Amazon have, “thumbed their noses” at Canadian regulators.

“What they’re doing, they’re coming into cities and they’re making a mockery of our laws, especially when it comes to safety,” agrees long-time Toronto owner/operator Gerry Manley.

“It’s now becoming worldwide knowledge, what they’re doing. It’s not fair. And, finally we’re getting the courts to sit back and take notice. If you want satisfaction, you must go through the courts.”

For his part, owner Bob Boyd suggests, “The only thing the governments can do now is get together, and come out in favour of very strong regulations on companies like Uber, and Google. I think that’s what’s going to happen.”

On April 25, a headline in The Financial Post blared that, “Canadian Watchdog Slams Facebook For Serious Breach Of Privacy Laws – And Then Refusing To Fix It.”

According to the Post, a joint report from two privacy commissioners cited major shortcomings in Facebook’s practices and called for stronger laws to protect Canadians. The probe was inspired by reports that Facebook had allowed an outside operator to use an app to access users’ personal information, and that some of that data was then shared with others.

Facebook disputed the report’s findings, and refused to implement its recommendations.

“The stark contradictions between Facebook’s public promises to mend its ways on privacy, and its refusal to address the serious problems we’ve identified – or even acknowledge that it broke the law – is extremely concerning,” stated federal privacy commissioner Daniel Therrien, in a press release.

Similarly, Uber was fined massive amounts by major international cities for a 2016 data breach, which exposed the accounts of 57 million users and drivers, and its year-long effort to cover it up (paying the hackers $100,000 to delete data). That included a $148-million fine from the State of Illinois, whose attorney general termed it, “the most egregious case we’ve ever seen.”

 

2019 Taxi News

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