|Last Year Lyft lost $911 million on revenues of about $6 billion. Uber lost $1.8 billion on revenues of about $50 billion. In the midst of these financial “disasters,” both are going public.
Lyft went first, last Friday. Their shares went on for a starting price of $72, which valued their money-losing company at $24 billion. Huh? You have revenues of $6 billion (Lyft’s 26.8% of the revenue they get from the fares, the drivers getting the rest), on expenses of $6.9 billion, and the company is worth $24 billion? By the end of the day, those shares were at $78, for a valuation of $26 billion.
Uber is not yet on the stock market but preparing for it, and is expected to be valued at about $120 billion when they go public. Meantime, they’re in the midst of acquiring a competitor for over $3 billion, to take out competition and to get into some of the countries they are not yet in. So, let’s see–They lost $1.8 billion last year but have $3 billion in funds to buy up the competition?
In fairness, the high valuations of the ride-hailing companies are not due to their sorry financial history but because of investors’ expectations that they will lead the way in driverless technology, own the cars themselves, and get most of the revenue they now give to the owner/drivers, not just 25-26.8%. And they expect, once driverless technology takes over, people will stop owning their own vehicles and will use their services instead. But, it’s a pretty big gamble, if you ask me.
Third, there’s this whole crypto-currency development that is freaking out the big banks and governments. If it becomes mainstream in financial transactions–and it is rapidly gaining strength–then the government and the big banks will lose considerable control of the financial industry. It’s still quite secretive, but the largest companies—Facebook, Amazon, Google, and many others—are working hard at developing their own cryptos, to compete with mainstream currencies. Some governments have already entered this space, as well.