Written by: Yash B.
Recently in the news, Uber has decided to unveil its Wall Street debut by issuing an I.P.O to the public. This means that Uber shares in the stock market, which were previously private, will be available for public purchase. The stock is said to be valued up to $100 billion. This is an interesting move by Uber, as their reputation has been tainted and their main competitor, Lyft, unveiled their IPO last month.Uber has had a rough history. Just last year, the company faced allegations of sexual harassment by one of its employees, stealing Google’s self-driving technology, and other strings of issues with its CEO, Travis Kalanick. In the midst of all this, Lyft, a start-up company (at the time) could try to gain $500 million in its rivalry with Uber. Since 2017, Uber has really been in the shadows, trying to recover from the economic nightmare of last year. Things haven’t been going well with their competitor’s stocks recently either.
Since the release of Lyft’s IPO, their stock has dropped by more than 15% of their original offering price. This is what Kathleen Smith, a IPO fund manager calls, “The Lyft Effect”, in which the company decides to break their IPO stock price, leading to unprofitable gains, and ultimately, a greater loss of money. I believe that Uber’s best move is to not break their IPO stock price and ultimately settle for something that is modest and will ultimately boost their sales.
In the case of Uber, if their IPO is at a lower price, then the investment spending will increase, therefore increasing aggregate demand. To decrease the inflationary gap that was a result, Uber will have to increase the prices of the stock to reduce the aggregate supply of the stock. In Lyft’s case, their IPO debuted at a much higher price, which caused less people to actually buy the stock. This means that investment spending would decrease overall causing aggregate demand to also decrease. Lyft would then have to decrease the price of their stock (something that they should’ve done earlier) to increase the aggregate supply.
I think that Uber made a very tactical decision. It just can’t be a coincidence that Uber makes a filing and investors compare it heavily to Lyft, making it look less attractive. The two companies are rivals in the same industry, and each is trying to gain the upper hand by making decisions that will shift stockholder money into their grasp, add investors to their side, and will sway public opinion and preference.
Overall, I feel that the industry of consumer transportation is rocky in general. Both companies seem to be in the red, and I feel like they need to offer other business ventures in order to make up some of the lost money. Uber has talked about how they have expanded into the food truck business, and how they have expanded their service internationally. While I do think that this is a good move for Uber, both companies have their hands tied. If Lyft’s stock keeps falling, it could foreshadow the fate of Uber.
Works Cited
Carson, Biz. "Uber's Unraveling: The Stunning, 2 Week String of Blows That Has Upended the World's Most Valuable Startup." Business Insider, 4 Mar. 2017, www.businessinsider.com/uber-scandal-recap-2017-3."Lyft Shares Hit New Low As Uber IPO Chatter Revs Up." U.S, Reuters, 10 Apr. 2019, www.reuters.com/article/us-usa-stocks-lyft/lyft-shares-hit-new-low-as-uber-ipo-chatter-revs-up-idUSKCN1RM2SZ.
Seth Fiegerman and Sara O'Brien, CNN Business. "Uber Readies Its Massive IPO After a Long, Bumpy Road." CNN, CNN, 10 Apr. 2019, www.cnn.com/2019/04/10/tech/uber-ipo/index.html.
"Uber Is Said to Aim for I.P.O. Valuation of Up to $100 Billion." 11 Apr. 2019, www.nytimes.com/2019/04/10/technology/uber-ipo.html.
I agree with you that Uber is currently dying and that Lyft is foreshadowing the future of Uber, but even with that, both companies need to make drastic improvements to boost their profits and keep them out of the red if they want to even think about keeping their company as a company that people can use on a day to day basis.
ReplyDeleteAnother threat to the industry is government regulation. Relative to the dominant form of vehicular transportation within cities previously (taxis), both ride sharing services are almost in a lawless limbo. As cities like New York rule that Uber and Lyft must have taxi medallions to operate (curtailing supply and ensuring quality), the overall appeal of these services will decline. This is potentially a bad thing for consumers and taxis have become notoriously expensive and low income commuters would be the most hurt by this industry's collapse.
ReplyDeleteUber and Lyft have both given off great concepts for society. For example, limits drunk driving, easy assess to transportation, increased employment rate, and they create competition towards one another. Although the overall concept of Uber and Lyft are helpful to society, the limited regulations for drivers makes the whole situation of "stranger driving stranger" sketchy. However its risky to drive via uber and lyft, the impact of these two industries on the economy has been pretty good. According to Uber.com "From driver earnings, to community spending, to increased mobility options, riders and drivers who use Uber are having a substantial impact on the economy in the United States." Looking at the economic impact, the sketchy to helpful ration is uneven.
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