The coronavirus has crushed the major drivers of Uber’s urban car services demand, including business travel and discretionary urban entertainment (clubs, restaurants, etc.). Their customers remain highly concerned about the health risks of all forms of public transportation.
Last Thursday, Uber announced a first half 2020 GAAP loss of $4.7 billion with a GAAP net margin of (-81%). Uber’s “official” full year 2019 result was a GAAP loss of $8.5 billion with a (-60%) margin, but these were based on problematic accounting that makes it impossible to evaluate Uber’s financial performance properly over time. After necessary adjustments that were documented in Part 22 [1], the more meaningful full year 2019 result was a GAAP loss of $5.9 billion with a (-42%) margin. Uber has now lost $23.2 billion in the past four and a half years.
Uber burned $4 billion in cash in the first half of 2020. As of June 30th, it had $7.8 billion in unrestricted cash and short-term investments on hand. Uber’s full year 2019 cash burn was $5.1 billion.
We have the worlds first zombie unicorn.
While many industries have been devastated by the coronavirus we should clearly distinguish critical between those with strongly profitable business model prior to the pandemic (such as Singapore Airlines, Marina Bay Sands, Disneyland, Etc ) and a zombie company like Uber that had been incapable of generating positive cash flow under perfectly ideal economic conditions.
There certainly needs to be agreement on how to best to restructure airlines, tourist and entertainment industries because they contribute substantially to overall economic welfare, and clearly can do so in the future. Take for example Lufthansa, the German flag carrier, which reported its largest ever quarterly loss for the three months to the end of June and has just taken a €9bn bailout.
Uber has only served to reduce overall economic welfare. Society has nothing to gain from “saving” Uber.
Even the “pivot” to food delivery is a zombie business before it starts. Firstly the hefty charges from Uber makes food-service substantially less profitable, and what does Uber get for us cut 2ndquarter Uber revenue in its “Eats/delivery” business doubled but the economics of these services were always substantially worse than Uber’s hopeless car service business. But 2ndquarter “Eats/delivery” had an “(fake) adjusted EBITDA” 25 margin points worse than car services, even after the big coronavirus driven boost in food delivery demand. And since Eats’ year-over year “(fake) adjusted EBITDA” improved by only $54 million (from negative $286 million to negative $232 million) even though revenue doubled, this business is clearly not “growing into profitability.”
Food delivery is hypercompetitive (DoorDash, GrubHub, JustEat, Deliveroo), neither customers nor restaurants can afford the true cost of the service, and none of these companies have ever been sustainably profitable. Uber has never presented a plausible argument it will suddenly become the first company to realize returns from investments in this business.
So let’s let Zombie Uber die
source (https://www.nakedcapitalism.com/2020/08/hubert-horan-can-uber-ever-deliver-part-twenty-three-ubers-already-hopelessly-unprofitable-economics-take-a-major-coronavirus-hit.html)