When it comes to Uber and its Imitators, the Proof is in the Pudding
It’s 4:00 p.m. in New York on May 13th. Three days ago, Uber, the gargantuan ride-sharing giant, went public at $45.00 a share. Today Uber closed at $37.10 per share (still heading south in after-hours trading), after being down as low as $36.08 per share during the day. That’s a drop of 10.86% from last Friday afternoon, the prior business day close, and a whopping 17.55% drop in share price since its debut.
For those of you who have been following me on LinkedIn as I have excoriated Uber, along with its business model, in article after article over the past several years, it will come as no surprise when I tell you: “I told you so”.
Not to put too fine a point on it, but there’s something radically wrong with a model of financing startups that values a company at $120 billion on day one, only to be followed several months later by a public market that values that same company at half that amount. It’s a disgrace that only when the “rubber meets the road”, “the acid test” is applied, etc. (pick your favorite cliche here) and the company goes public, does it then become evident that most of the later-round investors have quite literally, “been taken for a ride”.
The anomaly of having private companies valued in the stratosphere only to have that valuation be brought to earth at the time of their IPO can only be justified if one builds into economic theory the “benefits” to be derived by inserting a kind of “reverse Robinhood” into the process, a process where a few adroit individuals or firms rob from the poor only to hand over the treasure to an undeserving “nobility”.
What’s wrong with a society that continues to tolerate such an aberration, even in the face of indisputable evidence that it is simply so very, very wrong to do so??? What madness exists in those who continue to push this obscene model to the most extreme point imaginable before something is done to stop it, once and for all?
Several years ago, some Citibank analysts did a report for the firm’s ultra-rich clients warning them that there was the potential for great danger and risk to them and their portfolios in the form of a disaffected population with the power to vote. With disasters like Uber, it’s time for those same individuals to take heed and do something to stop the excesses which allow, in the words of Yeats, the monster to ever more closely creep “towards Bethlehem to be born”.
Ray Burrasca is the Executive Vice President and Chief Operating Officer of Archimedes’ Offspring, an unincorporated “umbrella” organization whose mission is to make “reasonable returns investing” affordable for the ordinary Joe’s and Jane’s and, in the process, to reinvent innovation in the America.He can be reached at ray@archimedesoffspring.com or by phone at (303) 910-2344.
