Uber is not a publicly traded company, but if it were, I would recommended shorting as many shares as you could borrow, beg or steal. That’s because the four-year-old purveyor of on-demand transportation is probably as insanely overvalued as venture-stage companies ever get. And that’s saying something, since, six years into a bull market, greed, recklessness and stupidity in the investment world have never been more cocksure. In December, when Uber promoted a $1.2 billion round of financing, investors effectively valued the company at $40 billion. That made it bigger than 359 of 469 companies listed on the Fortune 500 — bigger, in fact, than: Kraft Foods Group, Delta Air Lines, General Mills, CBS, Rite Aid, Macy’s, Viacom, Dollar General, Kellogg, KKR, Nordstrom, Halliburton Company, Archer-Daniels Midland, Omnicom Group, Charles Schwab Corporation, YUM! Brands, DISH Network, Aetna, ConAgra, Hormel Foods and Best Buy, to name just a few.
Earlier, when Uber was valued at a mere $18 billion, its initial backers stood to make 2000 times their initial investment. Will enough greater fools eventually come along to take them out of their shares at even higher prices? My guess is no — that if and when Uber goes public, the IPO will stumble out of the gate and lag the field at the first turn. Which is to say, the company’s ‘story’ will have peaked before the smart money ever gets a chance to unload on the rubes. That’s not to say its shares will have zero value or that Uber will not continue to grow its business. But success will have to be earned the old-fashioned way, one passenger at a time. As for those who are betting Uber will be able to grow another revenue stream by diving into the delivery business, they are in for a rude awakening, since the logistical problems are proving to be more than a little daunting. Keep in mind as well that even if the firm were to quintuple current revenues of around $2 billion, Uber’s 20% share of the take would barely qualify it for inclusion in the Fortune 500.
By then, it could be apparent that Uber’s chances for growth outside of the U.S. are far more limited than any of the giddy suckers who have been gobbling up insider shares might have imagined. As recently as six months ago investors seemed unconcerned about Uber’s bad reputation for playing hardball in cities that didn’t want them. But it’s getting harder to ignore the negatives now that the company’s increasingly vocal opponents have taken to burning cars and beating up passengers to keep the firm out. Nor is it inconceivable that the violence will spread to Uber’s home turf, as licensed cabbies in New York, Chicago and L.A. dig in their heels. At that point, an IPO might be like facing a firing squad. And if the bull market ends and the Dow is trading significantly lower, you can probably kiss Uber and a score of other dot.com 2.0 concept-companies-on-steroids good-bye.