7 min read

    7 min read

    In this weekly roundup, it’s all about the money: who’s got it, where it’s going, and who’s not getting much of it. Senior RSG contributor John Ince outlines all the money issues (and another lawsuit) involving Uber and Lyft’s IPO announcements.


    To Uber, I’m a driver but not a worker. But their billion-dollar IPO is built off my labor. [NBC News]

    Sum and Substance: Drivers do the vast majority of the work that makes Uber money, and they won’t even acknowledge us as part of their workforce.

    When Uber goes public this month, it will likely become the most valuable private company in existence. And yet the people that created most of that potential $120 billion in value — the drivers — are not valued by the company. Drivers are not (in Uber’s view) even workers, though we do the vast majority of the work. We get no perks, no benefits and no security. If we are killed on the job, we receive no survivor benefits since we are not eligible for workers comp.

    …Apps like Uber and Lyft sell a dream that can easily become a nightmare for drivers and riders. We can’t afford to live in the cities where we work, so there are parking lots throughout the Bay Area where Uber and Lyft drivers congregate, sleeping in their cars between hours-long shifts — many doing so for a few days before driving back to their homes in Vallejo, Sacramento, Stockton or other cheaper cities. There’s something wrong when the Uber CEO can buy a $16.5 million mansion but drivers sleep in parking lots.

    Driving for Uber is my job, not a side hustle as Uber markets itself. For many of us, driving for Uber is how we support our families and pay our rent. When Uber first started, drivers were paid fairly per mile but now, unless we drive 70 or more hours a week, there’s no way we can survive. I can’t continue working with no healthcare, no retirement and no security for my family if I’m injured or killed on the job…

    My Take:  Amen. This is an important article that captures the stark disparities of the gig economy. Here’s something to ponder: If Uber achieves a valuation of $120 billion and maintains that valuation for 90 days, then Uber CEO, Dara K will earn an additional $100 million on top of his existing salary and stock awards.

    The only way Uber achieves a valuation like that is if the company can convince investors that they’re on a plausible path to profitability. That only happens when the company starts to increase its net income. Guess where that additional income comes from? Unless Uber is willing to risk losing passengers by raising fares, then it comes from drivers.

    So is it any mystery that as the IPO approaches, driver incentives in quest, surge and per mile pay are being reduced?  Think about this – DK has incentives to earn an extra $100 million, and to reach that he’s taking from the drivers like this author and you – upon whose backs the entire company has been built.

    Uber gave CEO Dara Khosrowshahi $45 million in total pay last year, but it paid its COO even more [Business Insider]

    Sum and Substance: Uber paid its top five executives $143 million in total compensation last year. CEO Dara Khosrowshahi’s pay package was $45 million, but he wasn’t Uber’s top-paid executive. That was Barney Harford, the company’s chief operating officer, who received $47.3 million in total compensation. Uber disclosed the salaries as part of the S-1 document it filed as part of its proposed initial public offering. …

    The San Francisco startup handed out $143 million in total compensation to its top five executives last year, nearly all of which came in the form of stock awards. Khosrowshahi, for example, received a $1 million salary last year and a $2 million bonus. Uber also gave him three restricted stock grants that it collectively valued at $40.1 million. Additionally, it paid $2 million to provide him with security; reimbursed him for $89,000 of commuting, relocation, and temporary housing costs; and gave him another $98,357 to pay the taxes on those reimbursements.

    The big pay came despite massive operating losses

    Harford’s pay package contained a similar mix of components. Uber paid him $500,000 in salary and gave him a $1 million bonus. It also gave him restricted stock worth $26.3 million and stock options worth $19.6 million. The company paid $189,137 in security-related costs for him, reimbursed him for $40,236 worth of temporary-housing costs, and gave him another $31,347 to pay the taxes on that reimbursement…

    My Take: So Uber’s CEO gets more as a reimbursement for his commuting and temporary housing ($89,000) than 99% of drivers make net as full time drivers. As amazing as these numbers are, they still a peanuts in comparison to what Travis Kalanick, Garret Camp, Ryan Graves and other early employees and investors of the company will be worth after the IPO.  Kalanick and Camp together will be worth over $13 billion – all coming from a little over a decade of building this company. What’s wrong with this picture?

    Uber IPO filing shows US$10B in operating losses since 2016 [Bloomberg]

    Sum and Substance: Uber Technologies Inc. filed for an initial public offering, starting the clock on what’s expected to be the biggest U.S. listing this year. The U.S. ride-hailing giant lost US$3.04 billion on an operating basis in 2018 on revenue of US$11.3 billion, bringing total operating losses over the past three years to more than US$10 billion, Thursday’s filing with the U.S. Securities and Exchanges Commission shows.

    The long-awaited filing gives potential investors their first look at hundreds of pages of detailed information about Uber, which was founded in 2009 and has had a winding road to the public market. Uber, which is seeking to raise about US$10 billion in its IPO, according to people familiar with the matter, plans to kick off a road show to market shares to potential investors this month and would begin trading publicly in May.

    The offering is expected to be the largest U.S. IPO this year and among the 10 largest of all time on U.S. exchanges.

    My Take:  The one statistic that stands out here is the $300 million that was set aside to make a one time payment to 1.1 million qualifying drivers.  Somehow, 1.1 million drivers seems high to me. Are there really that many drivers who have given more than 2500 rides? I doubt it.  But then again, Uber didn’t explicitly say that all of the 1.1 million will be getting this bonus.

    Bad to worse: Investors sue Lyft following dismal post-IPO performance [SiliconAngle]

    Sum and Substance:  Lyft Inc.’s year just went from bad to worse, with the ride-hailing company being sued by investors for misrepresenting its market position when it went public March 28.

    In possibly a harbinger of what to expect of Uber Technologies Inc.’s coming initial public offering, Lyft popped on day one but dropped below its float price on its second day of trading.

    Despite allegations of market manipulation, Lyft has never fully recovered and was trading at $58.36 at the close of trading Thursday, down 19% from its debut price of $72 per share.

    Suffice as to say, investors are highly unimpressed with Lyft’s share price performance. Two separate class-action complaints against Lyft, as well as its officers, directors and underwriters, have been lodged in San Francisco state courts.

    According to Bloomberg, the investors claim that Lyft exaggerated in its prospectus when it claimed that its U.S. market share was 39% as well as intentionally failing to disclose issues with its bike sharing division.

    My Take:  Well that was quick.  Barely two weeks after the IPO, investors are angry. Sorry folks.  If you really wanted a more skeptical (and realistic) view of Lyft (or Uber) you could have gotten it right here.

    Readers, what do you think of this week’s roundup?

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    -John @ RSG

    John Ince

    John Ince

    John Ince is a former Fortune reporter and Wall Street banker. He has about 1,000 rides under his belt driving part time for Uber and Lyft.  He’s writing a book about his experiences entitled:  Travels With Vanessa:  A Rideshare Driver Tries To Make Sense of It all - For a sneak peak visit the link above.

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