Uber Technologies Inc.

Few companies today produce such strong reactions as Uber. Loved by millions for its cheap, convenient lift sharing, hated by licensed taxi drivers and sometimes its own, Uber is a controversial company. Founded in 2009 and at one time the largest private company in the world, Uber had just three drivers when it launched. By using the GPS signal of the user’s smartphone, Uber cuts out the difficult process of finding, calling, and meeting a taxi driver on the street. Today, Uber operates worldwide, and in 2021 the company had a market capitalization in excess of $90 billion mostly due to its lift sharing service, but also food delivery and electric scooter ranges.

Uber’s model involves operating on the margins of a highly regulated industry, lowering prices largely by avoiding the extra requirements of that regulation. This unsurprisingly has been met with great hostility from taxi drivers, and cities including Hong Kong have taken firm measures against its use, with some countries such as Denmark and Hungary banning Uber outright. Uber often continues to be used illicitly in those markets, with drivers running the risk of significant fines. The Uber phenomenon has been copied by other firms in widely different markets, with many prominent new companies describing themselves as ‘Uber for X’, hoping to emulate Uber’s user base of over 90 million active users, serviced by 3.5 million drivers.

Considering the vast impact Uber has had on our towns and cities, it's quite surprising that the company has struggled to turn a profit. One of the main reasons is the extremely low cost of the service – in major cities with regulated taxi industries Uber is frequently 50% or more cheaper than the regulated service, and normally considerably cheaper than other lift sharing apps. Combined with marketing spending and constant growth via acquisition, 2020 saw Uber generating a $6.8 billion loss. To remedy this, Uber has aggressively upped charges in some cities and Uber’s algorithms implement ‘surge pricing’, increasing costs temporarily at busy times. Just 5 cities account for 22% of all Uber bookings, so regulatory pressure is a major risk in those markets.

Great excitement and speculation were crushed when Uber’s 2019 IPO largely fell flat. There had been warning signs: the IPO of their main rival Lyft was weaker than expected, and in the run-up to the listing Uber lowered the estimated launch price significantly. At $42 per share, Uber was still the biggest IPO of 2019 and one of the top ten ever at that time. Major institutional investors include Softbank, Morgan Stanley, and Fidelity.