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Uber to Seal $3.1B Deal to Buy Careem This Week

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Re: Uber to Seal $3.1B Deal to Buy Careem This Week

#21

Post by alphast0rm »

emilsedgh wrote: post #2

How much capital does Uber have left? My understanding was that they only had a few billion dollars left and were burning > 1B a quarter. And they are still not profitable right? On what basis exactly are they going to IPO? What's the angle for buying shares of a company that is losing so much money?

From Uber's Q4 2018 report [1]:

  Gross cash: $6.4 billion in unrestricted cash ($4.8 billion at end of Q3 2018, $4.4 billon in Q4 2017)
[1] https://techcrunch.com/2019/02/15/uber-reports-3b-in-q4-reve...

Re: Uber to Seal $3.1B Deal to Buy Careem This Week

#22

Post by httpz »

jcfrei wrote: post #14

> Shareholders in Careem, whose backers include Saudi Prince Alwaleed bin Talal’s investment firm and Japanese e-commerce company Rakuten Inc., [...] Isn't a public Saudi Arabian fund already heavily invested in the Softbank Vision fund, which in turn has invested a lot in Uber? [0] I don't know who the respective principals are of these funds but that seems noteworthy to me (especially at these valuations). [0]: htt…

Saudi fund is led by the crown prince MBS. Prince Alwaleed bin Talal is a cousin of the crown prince but definitely not a friend. He was even arrested a few years ago under the order of the crown prince.

Re: Uber to Seal $3.1B Deal to Buy Careem This Week

#24

Post by ryan93 »

googlemike wrote: post #19
emilsedgh wrote: post #2

How much capital does Uber have left? My understanding was that they only had a few billion dollars left and were burning > 1B a quarter. And they are still not profitable right? On what basis exactly are they going to IPO? What's the angle for buying shares of a company that is losing so much money?

$50b in revenue last year is nothing to scoff at. They have levers for profit but instead re-invest every dollar. Your argument sounds exactly like what people said about Amazon years ago.

Try 11 Billion in revenue

Re: Uber to Seal $3.1B Deal to Buy Careem This Week

#25

Post by logicx24 »

Uber's strategy right now is to maximize horizontal integration across as many markets as possible. They're leveraging cheap credit and an infusion of private money (mainly from Middle Eastern investors looking to diversify their portfolios) to expand as quickly as they can in local transportation.

This growth, combined with their subsidization across all their products, is producing huge near-term losses. However, I think it's a prudent investment. Uber needs to solidify its moat in an industry that offer little in terms of differentiation beyond price. By trying offer as many services as possible, Uber's trying to make itself the go-to hub of local transportation, and in doing so, start to change its role from a dispatch middleman to a full service transportation platform.

And so, I think in the years following IPO, we'll slowly see them reduce their efforts for horizontal expansion and slowly turn the lever back towards profit. This will happen slowly and differently across markets, with price rises starting in regions they have the strongest foothold, but will slowly trickle across all markets. The hope for them is that through this rapid expansion, they've bought enough leverage to raise prices without losing too many customers.

Re: Uber to Seal $3.1B Deal to Buy Careem This Week

#26

Post by mbesto »

emilsedgh wrote: post #6
likeabbas wrote: post #3

Earlier quoted context omitted.

You can take on debt to buyout another company

The article mentioned $1.4B in cash.

Cash in this sense means they're not giving away equity of Uber's cap table as means to finance the acquisition. Where the cash comes from is a different story. As the parent comment suggested, this "cash" is likely levered with outside capital.

Re: Uber to Seal $3.1B Deal to Buy Careem This Week

#27

Post by jussij »

googlemike wrote: post #19
emilsedgh wrote: post #2

How much capital does Uber have left? My understanding was that they only had a few billion dollars left and were burning > 1B a quarter. And they are still not profitable right? On what basis exactly are they going to IPO? What's the angle for buying shares of a company that is losing so much money?

$50b in revenue last year is nothing to scoff at. They have levers for profit but instead re-invest every dollar. Your argument sounds exactly like what people said about Amazon years ago.

That $50b figure is not their revenue, but their gross bookings.

For example Uber's last quarter revenue was $3 billion on some $14 billion in bookings, with a loss of about $800 million.

Re: Uber to Seal $3.1B Deal to Buy Careem This Week

#28

Post by z2 »

DevX101 wrote: post #15
philsnow wrote: post #10

Doesn't this, so close to their purported IPO, fly right in the face of what they consider to be their network effect? Why would they need to buy competitors if not because it's expensive for them to compete against local upstarts who own a smaller market?

Uber's network effect is localized to cities. If Uber attempts to enter a market with a strong local player, the local player stands a decent shot at defending since Uber's global dominance doesn't really transfer over to that particular city. This is unlike social networks, like WhatsApp, where the network effect is truly global since people often have friends and relatives in distant cities.

There's an article I read recently on this very subject. Apart from social networks, it argues that even a platform like Airbnb is much stronger because the network is broad by design, with travelers coming from far away.

https://hbr.org/2019/01/why-some-platforms-thrive-and-others...

Re: Uber to Seal $3.1B Deal to Buy Careem This Week

#29

Post by deogeo »

logicx24 wrote: post #25

Uber's strategy right now is to maximize horizontal integration across as many markets as possible. They're leveraging cheap credit and an infusion of private money (mainly from Middle Eastern investors looking to diversify their portfolios) to expand as quickly as they can in local transportation. This growth, combined with their subsidization across all their products, is producing huge near-term losses. However, I…

It's interesting how little of this strategy involves providing a better service. But I don't think they're alone or even special from this perspective (e.g. similar to the rise of Microsoft).

I think the prevalence of "business strategy", as opposed to product/service improvement, in the growth of corporations, warrants much more scrutiny than it gets. After all, corporations should serve society - how do strategic mergers, acquisitions, lobbying, PR do that?

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