In this week’s roundup, we cover the California misclassification lawsuit, plus Uber and Lyft announce their first quarter earnings. Senior RSG contributor John Ince breaks down what this means for drivers below.
Uber is reportedly considering another investment in Lime, in a round that would sink the embattled scooter startup’s valuation by nearly 80% — and give Uber the option to buy it in 2 years [BusinessInsider]
Sum and Substance: Uber is reportedly considering leading a $170 million emergency fundraising round for the scooter startup Lime, according to the Information. The terms of the deal will hit the scooter startup hard. The round will reportedly slash Lime’s valuation to $510 million, a 79% slide from the startup’s whopping valuation of $2.4 billion in 2018.
As a part of the deal, Uber will have the option of buying Lime between 2022 and 2024 at a specific price, the report said.
My Take: Times change and valuations change too. You now see bikes and scooters littering the landscape in urban environments. When they might be used again is anybody’s guess. So Uber puts more money in. Whether it’s a good investment … time will tell.
LA, San Francisco, San Diego sue Uber, Lyft over driver classification [CNBC]
Sum and Substance: California Attorney General Xavier Becerra is suing Uber and Lyft, alleging the ride sharing companies have misclassified their drivers as contractors. City attorneys from San Francisco, Los Angeles and San Diego have joined Becerra in the lawsuit.
The lawsuit gets to the heart of a recent debate between gig economy companies and California officials. The lawsuit is based on a California law that went into effect earlier this year, known as Assembly Bill 5 (AB5).
Uber, Lyft and other companies opposed the law, which was created as a way to require gig economy companies to classify their drivers as employees, rather than contractors. The companies have said the law strips workers of flexibility in work that they enjoy, while government officials backing the bill say it affords workers key benefits they are otherwise denied as contractors.
My Take: This is the next step in Uber/Lyft’s battle. Can they forstall the eventual legal resolution until the fall when their effort to get on the ballot comes? I don’t know whether they’ll even get on the ballot now that the virus has hit. Things aren’t looking good for the companies as they try to cope with a whole host of issues – none of which helps.
Read more about the California lawsuit here.
Uber to lay off 3,700 employees, about 14% of workforce [CNBC]
Sum and Substance: Uber will lay off 3,700 employees, the company announced in a filing with the Securities and Exchange Commission.
The cuts to its customer support and recruiting teams represent about 14% of its 26,900 employees, based on Uber’s most recent headcount.
CEO Dara Khosrowshahi will also forgo his base salary for the rest of the year, which was $1 million in 2019.
My Take: CEO Khosrowshahi hits the nail on the head: “days like this are brutal.” No other way to describe things. 3700 people laid off, just like that. On top of it all, $20 million is severance expenses. Ouch.
Lyft shares jump 15% as company reports more riders than last year despite coronavirus [CNBC]
Sum and Substance: On Wednesday, Lyft reported losses of $398.1 million, and revenue of $955.7 million for Q1 2020.
Citing Covid-19 impacts to its business, Lyft recently laid off about 17% of its workforce, and slashed pay for remaining employees by 10% to 30%.
Heading into Q2, Lyft is facing a new lawsuit in the state of California, which alleged that the ride-hail company is misclassifying drivers as contractors, and should categorize them as employees instead.
Lyft shares shot up as much as 17% after hours as the company reported Q1 revenue and rider numbers that beat expectations. …
My Take: This is pretty amazing. Lyft announces a narrower than expected loss and shares jump 22% the next day. Somehow it seems that the stock price doesn’t reflect the reality that most of us have to deal with. Imagine what would have happened if they announced a profit …
Uber shares shoot up after CEO says ride volume is increasing again after April bottom [CNBC.com]
Sum and Substance: Ride-hailing giant Uber reported first-quarter results Thursday, including revenue of $3.54 billion and a net loss of $2.9 billion.
Uber Q1 net losses $2.9B adj vs. $1.4B estimated
Ride-hailing giant Uber just reported first-quarter results. The company’s shares initially dipped after hours, but then shot up as much as 10% as CEO Dara Khosrowshahi expressed optimism that ride volume is picking up again after bottoming out in mid-April. The move came on top of an 11% gain during regular trading.
My Take: The numbers for Uber were not good and still Uber stock went up. There’s something going on here and I don’t get it. How can a company lose almost $3 billion and still the stock goes up?
The Results Are In for the Sharing Economy. They Are Ugly. [NYTimes]
Sum and Substance: OAKLAND, Calif. — The coronavirus pandemic has gutted the so-called sharing economy. Its most valuable companies, which started the year by promising that they would soon become profitable, now say consumer demand has all but vanished.
It is not likely to return anytime soon.
My Take: Even with all this bad news, Uber’s stock was up 11% today and 6% in after hours trading. I just don’t understand what’s going on with these stocks. Uber loses almost $3 billion in a quarter and investors welcome the news. Sooner or later the stock has to reflect reality.
Scammers create program to manipulate Instacart orders [WSBTV.com]
Sum and Substance: ATLANTA — The people who deliver groceries and other essentials have become front-line workers in the COVID-19 crisis.
But we’ve learned that scammers have created software to manipulate the Instacart app, and it is costing employees work.
Instacart confirms there are some people out there trying to game the system.
They are running scam computer programs intercepting delivery jobs, what Instacart calls batches, keeping them from legitimate shoppers.
My Take: So in the midst of all the other stuff happening the scammers are still at work – this is terrible news for Instacart delivery drivers, and apparently Instacart even knows about it?! I’m not sure what the answer is to stopping these scammers, but surely Instacart can look behind the scenes and stop them.
Readers, what do you think of this week’s roundup?
-John @ RSG