Private transportation network company, Uber Technology Inc. has several shareholders call quarterly to ascertain up-to-the-minute information regarding business performance from Gautam Gupta, the head of finance.
Uber was recurrently losing money; Losses mounted in the later end of the second half of the year, Gupta revealed to investors. The U.S. too saw losses where there had been profits from its first quarter.
Uber defrayed approximately $520 million before taxes, depreciation, remuneration and interest in the first quarter. A vast incline in losses came in the second quarter of the year, with losses amounting well over $750 million with arrears of about $100 million in the U.S., said people aware of the company’s finances. For a total of a $1.27 billion in losses in the first two-quarters of the year.
Those cognizant of the matter said Gupta briefed investors that the indemnities of Uber’s drivers are a major reason for the losses the company faced globally. A spokesman for Uber declined to comment.
Blogger and business professor at New York University, who has written doubtingly of Uber’s outrageous valuation, Aswath Damodaran said;
“You won’t find too many technology companies that could lose this much money, this quickly”. He continued, “For a private business to raise as much capital as Uber has been able to be unprecedented.”
Bookings saw significant growth from the first to second quarter, surmounting above $3.8 billion to well over $5 billion. Under generally accepted accounting principles, the Net revenue grew about 18 percent, from approximately $960 million in the first to about $1.1 billion in the second.
On the call with investors, Uber spoke of the changes in how it calculates Uber Pool’s contribution to revenue in the second quarter, ultimately increasing revenue.
The seven-year-old company has lost at least $4 billion in the history of the company with at least $2 billion before amortization, taxes, interest and depreciation in 2015.
Uber’s losses have gone unprecedented; two now-defunct phantoms of the original dot-com boom, Kozmo.com, and Webvan—lost a little over $1 billion combined in their minute lifespans. Famous for losing money but increasing its market value is Amazon.com Inc., however, is a maximum calculated loss was only $1.4 billion in 2000. Uber far exceeded that amount in 2015 and is following suit in 2016.
Professor of law and business at Stanford, Joe Grundfest said, “it’s hardly rare for companies to lose large sums of money as they try to build significant markets and battle for market share,”. He furthered his statement saying “the interesting challenge is for them to turn the corner to become profitable, cash-flow positive entities.”
Second quarter reports of the company showed a loss but at that time critiques were saying that quarter loss is not a huge loss there can be profit in overall reports of the company. Recently an article was posted by the Bloomberg which is discussing the huge losses of the year. Among those companies which have faced losses, Uber is on top of the list. This transportation company has lost $1.27 billion, this loss is only in the first half of 2016. The company has faced this huge loss in the first quarter as well. In first quarter financial reports of the Uber showed that company is having loss of 520 million. Then after that huge loss in the second quarter $750 million, so after first two quarters of loss we were expecting that company will be recovering and then there will be profit in the next quarter.
The total financial worth of the Uber is $69 billion, so now we can easily see that there is a huge loss as compared to the total financial worth of the company.
So with these huge losses from the three consecutive quarters world is really looking towards the CEO of Uber Mr. Gautam Gupta. According to critiques the company is going to adopt growth strategy, this would be best in the interest of the company if they adopt growth strategy. We can also expect that company can go public, to collect public finance because public finance will help the company to reduce this mountain loss.
But the question is if the company goes for public financing will there be any investors who will wish to invest in the company which is facing loss from the past three consecutive quarters. Maybe, there can be few investors who wish to invest in Uber. Surely there are chances for the growth of the company in the future, but on the other hand, there are threats of the loss as well. Because past record of the company shows that it’s time for bad luck and company is not having any luck in profit.
So, if Uber decides to go for public financing, then the investors having venture capital and private equity who are already investors of the company will surely decide to sell their shares and they will leave ownership of the company.
We have already seen Uber is facing mountain loss so we can anticipate that company can have difficulties, if they decide to come into the market. But, if financial institutions and financing banks decide to invest in the Company then there will be no hard time for the company.
On the other hand, there can be few shareholders sitting in the market who are experts in the field they will decide to purchase shares of the company for once. So when the company will open trading options they will purchase shares from the company at low rates.
This is very difficult situation for the company now after the third quarter of the huge loss; the company is left with no other option now. Because public financing seems a wrong choice for the company and the recent situation is not in the favor of company. Let’s see what they do to turn a loss into profit.