What Uber’s investors should be worrying about
This flawed analysis, which relies on my own reported numbers yet incorrectly contradicted my own analysis, motivated me to get into the unhinged Uber skepticism game. I’ve decided to put together my list of Uber’s RISK FACTORS — capital letters are required here, based on my cursory review of pre-IPO prospectuses — knowing that some potential Uber investors haven’t received such warnings. This exercise doesn’t, however, reflect any sort of optimism on my part that Uber will go public anytime soon.
I’m borrowing liberally — and in the case of some boilerplate, verbatim — from Goldman Sachs’s 1999 prospectus.
For starters, the bank’s lawyers nailed the staid tone that I’m looking for here. Second, if you Google “risk factors prospectus,” it is the top result. Lastly, Uber is filled with former Goldman bankers, so I’m sure that when the time comes, Uber’s finance team will consult this document.
OK, here’s what Uber’s investors should worry about:
RISK FACTORS
An investment in the common stock involves a number of risks, some of which, including market, liquidity, credit, operational, legal and regulatory risks, could be substantial and are inherent in our businesses. You should carefully consider the following information about these risks, together with the other information in this prospectus, before buying shares of common stock.
The Ride Hailing Industry Is Intensely Competitive
We have experienced intense price competition in all our businesses in recent years. We face persistent, relentless and over-capitalized competition on every continent except Antarctica. Even in our longest-running U.S. cities, we face pressure to offer drivers incentives and to discount rides in order to retain our market-share advantage. The ride-hailing industry does not seem to be a global winner-take-all market. This may be a low margin business like many other transportation companies.
Legal and Regulatory Risks Are Inherent and Substantial in Our Business
European Regulators Could Determine That We Operate as a Transportation Company and Not a Technology Company
Eek.
Our Exposure to Lawsuits Based on the Employment Status of Our Driver Partners Is Significant
Our ability to fend off class action lawsuits in the U.S. may depend on the strength of our ability to innovate on arbitration clauses. We are regularly updating our terms of use to include the most up-to-date arbitration clauses, but such legal genius may not be sufficient.
We may also face lawsuits related to our background check practices, our former “safe driver fee,” the occasional murderous rampages by drivers and any number of other issues.
Competitors May Continue Raising Money Until We Acquire Them, Further Perpetuating Incentives for Investors to Fund Them
The only competitive market that has a single dominant player is China, where we cut a deal with our biggest rival Didi Chuxing. This may signal to investors in Ola, Lyft and Grab that they should continue to pour money into those companies until we cut a deal. While we can insist that we won’t, such claims seem less credible after we did a deal in China.
We Are Exposed to Special Risks in Emerging and Other Markets
Uber Is Controlled By Its Co-Founder Travis Kalanick, Whose Interests May Differ From Those of Other Shareholders
Our Common Stock May Trade at Prices Below the Current Valuation
Um, What Major Investor on Earth Doesn’t Already Own Our Shares?
Self-Driving Cars May Take Longer Than We Think
Self-Driving Cars May Come Sooner Than We Think, and Google, General Motors or Tesla Motors May Beat Us to Developing a Fully Autonomous Vehicle
Food Delivery Is a Tough Business
We Have Lost More Money Than Amazon Lost During the Dot-Com Boom in a Shorter Period of Time. Just Sayin’
We Don’t Actually Have an Official, Official CFO (but Gautam Is Great!)
Our Closest Comp Is Probably the Imperial Army From Star Wars
Our Computer Systems and Those of Third Parties May Not Achieve Year 2000 Readiness — Year 2000 Readiness Disclosure
I’m kidding on that last one, but it’s hysterical to me that this was a risk factor for Goldman back in ’99.
This originally appeared in Bloomberg Technology’s newsletter Fully Charged. Sign up here.
