We all know and love Uber as the fantastic new-age cab service that’s always available and reliable. Unfortunately, things aren’t looking very positive for the company at present.
Every 3 month Uber has a meeting with its shareholders to share the latest info and stats regarding the company. At the latest gathering, it was revealed that Uber has lost more than $1.2 billion in the 1st half of 2016.
Even though Uber had turned a profit in the U.S. in the first quarter, the company was once again losing money.
In the first quarter of this year, Uber lost about $520 million before interest, taxes, depreciation and amortization. In the second quarter the losses significantly exceeded $750 million, including a roughly $100 million shortfall in America.
That would mean Uber’s losses in the first half of 2016 totaled at least $1.27 billion.
Apparently one of the biggest reasons for the major loss comes down to Uber-driver compensation.
“You won’t find too many technology companies that could lose this much money, this quickly,” said Aswath Damodaran, a business professor at New York University who has written skeptically of Uber’s astronomical valuation on his blog.
“For a private business to raise as much capital as Uber has been able to is unprecedented.”
Most surprising is probably the fact that losing money is nothing new to Uber. In 2015, Uber lost at least $2 billion before interest, taxes, depreciation and amortization. Uber, which is currently 7 years old, has lost at least $4 billion in the history of the company.
“It’s hardly rare for companies to lose large sums of money as they try to build significant markets and battle for market share,” said Joe Grundfest, professor of law and business at Stanford.
“The interesting challenge is for them to turn the corner to become profitable, cash-flow-positive entities.”
Things could perhaps change in the 2nd quarter, as Uber have now cuta deal with its largest global competitor Didi Chuxing, a Chinese cab service. China has never been a strong-suit for Uber. Didi Chuxing has, in essence, paid Uber handsomely to pull efforts concerning China.
“Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there,” Uber Chief Executive Officer Travis Kalanick wrote in a letter announcing the company’s departure from China.
Uber has about $8 billion in the bank and will soon receive $1 billion in cash from Didi. Uber also has access to a $2 billion credit line and a $1.2 billion loan.
“I think what Uber is trying to do is, ‘Hey, look, we’re going to take the losses up front in order to get to disproportionate scale,'” said Robert Siegel, lecturer in management at Stanford’s business school.
“The question is when they can get to profitability.”