Uber’s Stock Market Debut Raises Concerns for the Future of the Gig Economy

By


On Friday, May 10, 2019, Uber made its debut on the New York Stock Exchange setting its initial public offering (IPO) at $45 a share. Ultimately, the company’s stock closed down 7.6% for a price of $41.57 a share. News websites quickly lamented Uber’s disappointing performance, calling it “a rare event on wall street” and noting that the company had “the worst performing IPO in U.S. stock market history”.

When Uber decided to start trading on the New York Stock Exchange, they took a more conservative approach at setting the IPO at $45, even though analysts had given an expected range of up to $50 a share. Lyft had entered the stock market in March but largely struggled after a strong debut and Uber executives were cautious, even going so far as trying to temper hype and expectations. After the stock market closed on Friday with Uber’s stock selling even lower than anticipated, news media began to start analyzing the situation to understand what this may mean for Uber’s future.

The Washington Post viewed Uber’s dismal start as part of larger struggles in the gig economy. They believe investors may be questioning the sustainability of companies such as Uber and Lyft that are losing billions of dollars a year and still have yet finalized a plan to be profitable. Both TNCs reportedly charge less per ride than what it costs to provide them and, until they can find a model that yields a positive return, the amount of optimism for the future of the gig economy is at risk.

Vox takes a slightly more optimistic view, acknowledging that companies such as Facebook and Google underperformed when they first came into the stock market and have since become profitable. In addition, “most of Uber’s prior shareholders cannot sell their stock for six months during what’s called a lock-up period”, so the company still has a grace period of sorts to improve their numbers.

Still, Uber must find a model that works in the coming months if they intend to alleviate the worries of current investors and draw in additional investments in the future. Uber’s expansion into micromobility with the purchase of Jump in April 2018 shows that there is a willingness to expand beyond solely being a ride-hail service that follows other continuing experiments such as UberEats. Time will tell what the future holds for the gig economy, but for Uber, time appears to be running out.

Comments

Post a Comment

Popular on the Blog

Final Policy Guidelines

By
Students, I was exceedingly pleased with the quality of your final presentations and wanted to share them publicly.  Here they are: Ridehail (TNCs) - Presentation , Guidelines Micromobility - Bikeshare and Scooter Share - Presentation , Guidelines Freight and Goods Movement - Presentation , Guidelines   Courier Network Services - Presentation , Guidelines Real Estate and Curb Management - Presentation , Guidelines Future Shared Vehicles - Presentation , Guidelines Mobility as a Service - Presentation , Guidelines
Read more

Take to the Streets! The (AV) Revolution is Coming

By
Image
When I think about new mobility and new technologies that enable it, I get most excited about the possibilities to remediate or reverse the inequities and injustices caused by our current autocentric transportation and land use regime. Our transportation system currently and historically on the biggest tools enabling systemic  injustice and exploitation in the United States and globally. Those who control our transportation system have turned it into the largest contributor to the climate emergency, perpetuator of environmental injustices, and catalyst for exploitation and expropriation of oppressed communities Consider the freeway riots, suburbanization and white flight, hyper-gentrification, and pollution burden. Transportation planning is implicated in all of these processes. It will also be instrumental in dismantling them. If we collectively organized ourselves, we could already have livable cities, mobility justice, and (significantly) decarbonized transportation system...
Read more

In TNC wage war, econ 101 is on the driver’s side

By
Image
Hold on tight, passengers, it’s gonna be a bumpy ride We frequently read and hear that ride-hailing companies like Uber and Lyft are money-losers and are unlikely to be profitable in the near future. However, given that both companies are trading on public markets with a combined worth of more than $80 billion, investors must be thinking they will reach profitability at some point. The question is whether this profit will come from higher prices charged to passengers, or lower wages given to drivers. In a recent New York Times Upshot piece, Austan Goolsbee, a well-known economist and former adviser to President Barack Obama, makes the case that, in this scenario, passengers will be footing the bill. Goolsbee substantiates his claim in a way that those of his of economics-trained ilk know how to best--via the theory of "relative price sensitivity." Economic theory predicts that those who are more sensitive to prices changes will pay less, while those who are less pr...
Read more