The

Big Short

Uber’s

Path of Destruction

Uber’s investors, however, never expected that their returns would come from superior efficiency in competitive markets. Uber pursued a “growth at all costs” strategy financed by a staggering $20 billion in investor funding. This funding subsidized fares and service levels that could not be matched by incumbents who had to cover costs out of actual passenger fares. Uber’s massive subsidies were explicitly anticompetitive—and are ultimately unsustainable—but they made the company enormously popular with passengers who enjoyed not having to pay the full cost of their service.

Uber’s longer-term goal was to eliminate all 

meaningful competition and then profit from 

this quasi-monopoly power. 

These beliefs about Uber’s corporate value were created entirely out of thin air. This is not a case of a company with a reasonably sound operating business that has managed to inflate stock market expectations a bit. This is a case of a massive valuation that has no relationship to any economic fundamentals. 

Uber has no competitive efficiency

 advantages, operates in an industry with few 

barriers to entry, and has lost more than $14 

billion in the previous four years. 

But its narratives convinced most people in the media, invest­ment, and tech worlds that it is the most valuable transportation company on the planet and the second most valuable start-up IPO in U.S. history (after Facebook).

DYI:  Here we go again as it seems we are going to have a redo of the 2000 market top.  Another BS company bleeding money at a feverish pace, soon to make it into the dustbin of failed companies, once investors realize this is nothing less than a Ponzi scheme the abandonment by investors will drive the stock price to zero. The next big short?  Not the purview of the Dividend Yield Investor, just something I’d like to pass along.

DYI