Uber Investors Feeling Our Pain

In March the U.K. Supreme Court ruled that Uber’s drivers were employees not independent drivers. This expensive reclassification cost Uber $600 million and counting. Uber might be forced to pay holiday time off, pension contributions and more so the story continues.

For investors, this makes it crystal clear on what the true cost of operating under the employee model for transportation looks like. Further, after spending and incredulous $200 million last year to push for VOTE YES on Prop 22 it seems the Biden Administration – who backed VOTE NO on Prop 22 – may cancel out their victory after all that! As reported last week, the new Administration is leaning towards a federal mandate that, like the U.K., ride hail drivers are treated as employees.

To account for these huge costs, Uber announced yesterday that they sold off their self-driving division for $1.6 billion. Selling off assets to pay off debts almost always makes investors jittery and this was no exception. Uber’s stock dropped nearly 5% due to fears from shareholders that the company was in for a rocky ride (no pun intended). The shareholders now know that the price for services will go up – just how much has yet to be revealed but as the driver shortage rages on, other big expenditures the company is finding unavoidable are the costs of recruitment and retention. According to Ubers’ CFO, Nelson Chai, “Uber will spend between $450 million and $480 million in the second quarter on marketing to attract new drivers, as it faces driver shortages in the U.S. and Mexico.”

Those are whopping numbers in anyone’s world and is good news for chauffeured transportation. All we want is a fair playing field, right? Well, it continues to look better for us as time catches up to the ride hail model. Can you imagine if Uber’s services were more expensive than ours? That is becoming a distinct possibility with each passing day.