Uber isn't in Kansas anymore


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This spring, I took a course on valuation, or, the theory of how to value something, usually a company, with Aswath Damodaran at NYU. The aptly named “Dean of Valuation” has valued Uber a handful of times, and most recently concluded it was worth about $60 billion, plus or minus a few billion dollars based on your approach.

Damodaran in his class emphasizes that valuation is not an art or a science, but a craft. A good valuation, he says, is a bridge between stories and numbers. Every story should have a number attached to it, and every number a story behind it.

As private technology companies, Uber and Lyft were surrounded by people who told big stories with even bigger numbers. Uber’s story—personal transportation and logistics, for the world!—had venture capitalists valuing it at nearly $70 billion as early as August 2016. The pressure to expand the story never went away. In Uber’s IPO filing, it framed the total market for its rides service as the 4.7 trillion vehicle miles traveled in trips under 30 miles in the 63 countries where it operated in 2018, of which Uber said trips taken on its platform made up less than 1%.

It strikes me that as these unicorns go public, what we really are witnessing is the collision of very different stories. Bankers, in their early proposals, somehow figured out a way to value Uber at up to $120 billion, a story that now looks like a fairy tale. When the company finally priced its IPO last week, it did so at $45 a share for a market cap of around $82 billion, the low end of its expected range.

So far, public investors seem to think even that was too high. After falling 7.6% from its $45 IPO price in its first day of trading, May 10, Uber tumbled another 11% on May 13 to $37.10. The debut wasn’t helped by an escalating US-China trade war that pushed major indices sharply lower on May 13. At the end of that day, Uber’s market cap had fallen to $62.2 billion, its lowest point since private funding in July 2015 valued the ride-hail company at $51 billion. On Wall Street, people have gone from celebrating the $120 billion story to wondering how bankers indulged in such fantasies.

“Obviously our stock did not trade as well as we had hoped post-IPO,” Uber CEO Dara Khosrowshahi wrote in a note to staff on May 13. The stock rebounded a bit yesterday and this morning alongside the broader market.

Lyft, which went public in late March, hasn’t fared much better. The company’s stock most recently closed at $50.52, roughly 30% off its $72 IPO price. It took less than three weeks for the first shareholder lawsuits to accuse Lyft of overhyping its prospects. For the first quarter of 2019, Lyft reported a loss of $1.1 billion on $776 million in revenue—more than it lost in all of 2018.

Khosrowshahi has urged employees to focus on Uber’s long-term prospects. “Remember that the Facebook and Amazon post-IPO trading was incredibly difficult for those companies,” he wrote in his staff note. “And look at how they have delivered since.”

Uber employees aren’t the only ones with a lot riding on the company’s public fate. While early investors are bound to make a killing, Uber’s biggest later-stage backers bought in at a much higher price. Softbank, for instance, Uber’s single largest shareholder, paid $48.77 per share for a chunk of series G preferred stock in January 2018, though it purchased the bulk of its stake from existing shareholders and employees at a discounted price of $32.97. Other series G investors such as Tiger Global Management, T. Rowe Price, and the Saudi Arabia Public Investment Fund may also have bought in at $48.77 per share, a figure higher than both Uber’s IPO and current market price.

Softbank also slipped lower on May 13. “It’s a bit hard to be sure, but I think the performance of Uber is probably the biggest driver of Softbank’s fall,” Morningstar analyst Dan Baker told CNBC. “SoftBank is long ride hailing through the Vision Fund and the performance of both Uber and Lyft since listing may have lowered investors’ expectations on what SoftBank’s investments in the space are worth.”

Entrepreneurial opportunity.

The National Labor Relations Board released an April 16 memo yesterday that says Uber drivers are independent contractors, not employees, under US labor law. The decision, hardly surprising under a Trump-appointed NLRB, makes it even less likely that Uber drivers in the US will ever see certain protections afforded to traditional employees, such as the right to form a union.

The NLRB decision relied on a ruling from January that found shuttle van drivers for SuperShuttle to be independent contractors, not employees, and stripped them of the right to unionize. As I said at the time:

This case is not about Uber, and yet it is entirely about Uber. SuperShuttle’s business model is a shabby, low-tech version of Uber. The company enlists shuttle drivers who own their vehicles and pay their on-the-job expenses. It provides them with a dispatch system to receive ride requests. The thesis on which the labor board based its decision—that SuperShuttle drivers are not employees because they “have total autonomy to set their own work schedule”—could easily have been penned by Uber.

In its April 16 memo, the NLRB wrote that “the level of company control should be assessed in the context of its effect on entrepreneurial opportunity.” The board made a similar observation in the SuperShuttle case. It concludes that because Uber lets drivers set their own schedules, choose where they log into the app, and work for competitors, the company offers them “significant opportunities for economic gain and, ultimately, entrepreneurial independence”:

The Board’s recent decision in SuperShuttle squarely supports the conclusion that the extent of company control—by minimally impacting economic and entrepreneurial opportunity—weighs in favor of independent-contractor status for the UberX drivers. Indeed, UberX drivers had more entrepreneurial opportunity than the drivers in SuperShuttle, who could control their earnings by selecting specific trips based on profitability, because UberX drivers could base decisions about where and when to log in on time-limited earnings opportunities like “surge” fares and their total freedom to work for competitors.

Case closed, at least for this NLRB.


Bird, the shared electric scooters company, would like to sell you a scooter. The Bird One is the industry’s “most durable e-scooter for sharing and ownership,” Bird says in a recent press release. Bird One comes in three colors: jet black, dove white, and electric rose. It’s available for preorder now, with delivery expected in the summer. Oh, and it costs $1,299.

What is Bird thinking?” asks Fortune, and, well, here’s a guess. A Bird One presumably costs less than $1,299 to manufacture, meaning Bird can turn a profit on each sale. That would be a big improvement on Bird’s current business model of hoping each scooter in its shared fleet generates enough revenue to offset its purchase purchase price and operating costs before being stolen, vandalized, or just getting too banged up to ride. (The rebranded Xiaomi scooters Bird initially deployed on its platform definitely weren’t cutting it.) Bird’s scooter preorder page also hints at additional fees for services like GPS tracking and “advanced network connectivity,” suggesting the full price of a Bird One could not only top $1,299, but also have some sort of recurring software licensing component, sort of like the Peloton model.

The Bird One will appear in Bird’s shared fleets in addition to being sold for individual use. Bird has made several tweaks to this model to make it better suited for sharing, such as improving the scooter’s battery life and range, and increasing its weight limit to 220 pounds. The Xiaomi scooters had a weight limit of 200 lbs, barely more than the weight of the average American man.

Bird, in its ongoing quest to build a sustainable or at least less-money-losing business, has already marketed a franchise program, raised prices, and introduced a subscription-style offering in San Francisco and Barcelona that costs $25 a month. Building a more durable scooter strikes me as the most important thing the company can do, considering how wildly unsustainable some of them seem to be, and Bird CEO Travis VanderZanden seems to agree. “We’ve been hard at work on future hardware as well, with even bigger batteries and more ruggedized [scooters],” he told the Verge last week. “If it makes sense from an economic standpoint, and ideally improves the rider experience, then it’s a no-brainer.”

Hidden fees.

Postmates is up to its old tricks, according to a class-action complaint filed in US District Court for the Southern District of New York on May 1. The complaint alleges Postmates “has made false, misleading statements that are likely to deceive reasonable customers.” It specifically cites Postmates’ service fee, which is concealed behind a box in the order checkout process titled “taxes and fees.”

The plaintiff also alleges that Postmates’ online ads promising to deliver “Anything. Anytime. Anywhere” is “false, misleading, and likely to deceive reasonable customers, such as Plaintiff and members of the Class, because the Service is not able to deliver ‘Anything. Anytime. Anywhere.’”

I mean look, I feel like most “reasonable customers” would see that for an ad and not a true honest-to-god promise. It’s not like anyone expects Postmates to deliver them a burrito on an airplane. As for the hidden fees, this racket has been going on for a long time—please see the cautionary tale of Shawn Cook—but if someone feels like suing over it now, more power to them.

This time last year.

Uber ends forced arbitration for sexual harassment, Cereal saves Airbnb

Other stuff.

WeWork wants to be its own landlord. Uber Eats needs to deliver more than ever. Amazon paying employees to start their own delivery companies. Amazon rolls out machines to automate packing customer orders. Uber tests Uber Comfort. Lyft experimenting with rental cars. Uber settles most arbitration claims. Airbnb hires Chief Trust Officer. IPO bubble not boosting SF housing prices. Uber talking with Nuro to test autonomous Eats delivery in Houston. Profile of Uber CFO Nelson Chai. Profile of Uber co-founder Garrett Camp. Social-good investment firm touts strong returns. Boxed looks for spot on grocery shelves. HelloFresh now selling regular TV dinners. Harry’s razors bought for $1.4 billion. The second time around, Kozmo.com is profitable. Semiretired millennials.

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Send tips, comments, and Bird One preorders to @alisongriswold on Twitter, or oversharingstuff@gmail.com.