Uber released a prospectus last week for their upcoming IPO (initial public offering).  What was striking is that they are seeking to raise as much as Facebook did in their IPO in 2012.  The difference being that it the time Facebook was making hundreds of millions in profit while Uber lost $1.8 billion last year.

Which Uber’s revenue was $41.5 billion last year, the great majority went to its driver.  Only $9.2 billion accrued to Uber.  And there is some question as to whether Uber drivers will be classified as employees or contract labor.  Should they be declared employees, then Uber will be responsible for unemployment insurance, workman’s comp, social security tax, medical insurance and more.

Forty-eight pages of the 285 pages prospectus dealt with risk.

Uber, along with a half dozen other companies, are looking to the self driving car market.  But Whammo, Google’s self-driving car effort, Apple, Ford motor company, Tesla and others are all aiming for the same slice of the pie.

And Uber’s “restaurant meal delivery” product has competition from a dozen start-ups.

Lyft is in a very similar position.

There is some question as to Uber and Lyft’s ability to hold on to drivers that, by some measures, earn less than someone working at McDonalds.

Uber’s 4th quarter revenue fell in 2018 due to having to pour out incentives and promotions and discounts to keep up with Lyft and other challengers.

Start-ups are likely to proliferate, meaning Uber and Lyft will have to continue offering discounts to keep market share.  This on top of already loosing hundred of million of dollars per quarter.

Bottom line, I wouldn’t touch either stock with a ten foot pole.

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