Uber rich, uber good, uber bad and Uber IPO

Depending on when you read this, Uber is either listed on the stock market, or is about to be. The question I want to consider today is whether Uber shares should join the list of companies that make up your portfolio.

Article updated: 9 May 2019 10:00am Author: Michael Baxter

Uber: it means denoting an outstanding example of particular person or thing. You can be uber rich, uber clever, or I guess uber evil.

Scouring the media coverage today, I can’t help pick up uber negativity. And not just from an investment point-of-view. There is a lot of talk about greed, about Uber drivers on minimum wages, who must sleep in their cars just to make a living, and on the rich who are about to become even richer.

The matter is not helped by the fact that Travis Kalanick, the founder and one-time CEO of Uber, has a bad boy image.

Then there is the investment case. It looks like the company will be valued at around $80 billion — some might say that is rather a lot for a company that makes massive losses.

Shares in Lyft, Uber’s main rival, are down by a third since its IPO at the end of March.

Even Warren Buffett has got in on the uber Uber bashing act. 

“In 54 years, I don't think Berkshire has ever bought a new issue," he told CNBC.

"The idea of saying the best place in the world I could put my money is something where all the selling incentives are there, commissions are higher, the animal spirits are rising, that that's going to better than 1,000 other things I could buy where there is no similar enthusiasm … just doesn't make any sense.”

The upside

Well, I am not going to disagree with the Sage of Omaha. He is right, of course, IPO prices get distorted.

There is, however, a reason to think Uber will eventually be worth a lot more than $100 billion in a few years time — a lot more.

Forget food delivery by taxi, or bike share, or scooter share. A punt on Uber is an investment in a much bigger idea.

I believe that with the arrival of autonomous cars during the next decade, the car market will be transformed.

I know there is no shortage of autonomous cars cynics, but their doubts ignore what will become a simple truth. At some point in the 2020s, probably mid-decade — autonomous cars will be safer than cars driven by people. Within 18 months of that, a lot safer.

Autonomous cars will be dominant before the next decade is up and unless you live out in the sticks somewhere, or have a hobbyist interest in cars, we won’t own cars, instead the TaaS model, (transport as a service), will be dominant. The car industry will be transformed — the big bucks will go to the companies that provide the technology to support lift sharing.

This market may be conducive to a natural monopoly and Uber sits in pole position on this track.

It may not be Uber, competition authorities may step in, one day the algorithms that support lift sharing may be seen as synonymous with a public utility.

Even so, I believe there is a high chance Uber will one day become one of the most valuable/most valuable companies in the world.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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