Uber IPO to launch Friday amid reporting large losses
The ridesharing company will go public with large losses.
Why isn't Uber profitable?
Since Uber started reporting its financial data in 2014, the rideshare company has lost $6.8 billion and $3 billion in 2018 alone. When the corporation filed paperwork to go public, the company said that it wasn’t profitable and may not ever make money.
‘We may not achieve profitability,’ noted Uber.
'Many of our efforts to generate revenue are new and unproven, and any failure to adequately increase revenue or contain the related costs could prevent us from attaining or increasing profitability,’ added Uber.
Uber’s expenses come from insurance costs, driver and rider incentives, marketing and research into self-driving cars. The rideshare company is also investing heavily in other ventures like Uber Eats.
Can Uber’s IPO be like Amazon?
While Uber’s IPO may not be profitable at first, the corporation points to Amazon as an example of a company to follow. Amazon took years to make money after it went public in 1997. Asad Hussain, tech analyst at PitchBook Data, noted that many corporations are focusing on growth before earning a profit.
‘More and more companies today are adopting the Amazon approach of focusing primarily on expanding their user base and bookings growth and expanding their revenue growth and going after new markets, but they also have to spend aggressively to the detriment of profitability,' said Hussain.
How can Uber’s IPO turn a profit?
Arun Sundararajan, professor at NYU's Stern School of Business, noted that for Uber to turn a profit, there will have to be a major shift in how Americans view transportation and shift away from car ownership.
‘If Uber wants to be a trillion-dollar company, it will have to invest very heavily in that behavior change. They will have to move out of cities, and convince people to give up their second and even primary cars. That's a slow, expensive process that involves investor patience,’ said Sundararajan.
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