Uber, the ride-hailing and delivery service, has lost $5.9 billion (£4.7 billion), owing to its investments in other businesses. However, Uber Technologies Inc said on Wednesday that it did not need to increase incentives to attract more drivers and that the second quarter would be strong.
Uber shares fell 9% in early trade. Investors were rushing out of stocks of loss-making companies whose consumer-facing industries could come under greater pressure as inflation rises, according to analysts.
Almost all of the loss, according to the corporation, was caused by a drop in the value of assets in businesses like Didi in China and Grab in Southeast Asia. Didi and Grab’s stock has plummeted since they went public in New York last year.
Uber’s Chief Financial Officer, Nelson Chai, stated that the company had the liquidity to hold on to the losing investments and sell them at a later date.
Uber was able to rely on its food-delivery service, Uber Eats, which grew in popularity during the pandemic, exactly as demand for ride-sharing services fell. Despite the return of indoor dining, the delivery category has continued to grow. The bookings were up 12% year over year to an all-time high of $13.9 billion. Uber Eats’ success has also helped the company attract more drivers to its ride-hailing service. Drivers, many of whom converted to food delivery during the pandemic, have been enticed by the ability to switch between carrying meals and people to make money.
The Setbacks
Uber’s first-quarter loss increased to $5.9 billion from $108 million a year ago, owing to a $5.6 billion reduction in the value of holdings in other businesses, particularly Didi, a Chinese ride-hailing startup.
Uber sold its operation in China to Didi in exchange for an 18 percent share in the Beijing-based firm in 2016, as it faced stiff competition in the world’s second-largest economy. Since its $4.4 billion launch on the New York Stock Exchange (NYSE) the previous summer, Didi’s market capitalization has dropped by more than 80%. China’s internet authority ordered online businesses not to sell Didi’s app within days of its IPO, claiming it illegally acquired users’ personal data. Didi confirmed this week that the US Securities and Exchange Commission (SEC) was investigating its IPO.
Uber sold its businesses in Southeast Asia to Grab for a 27.5% ownership in the Singapore-based company in 2018 when both companies were still privately owned. In December of last year, when Grab’s shares were first listed on the Nasdaq stock exchange in New York, they plummeted. Since the IPO, which was the largest ever by a southeast Asian company in the United States, its stock market value has declined by over 75%.
Uber also owns a share in Zomato, an Indian food delivery service, which it received in 2020 in exchange for its Uber Eats operations in the country. Since making a successful stock market debut in July, the value of Zomato’s shares has nearly halved.
Despite all the setbacks, Uber’s CEO Dara Khosrowshahi emphasized the company’s efforts in recovering from the pandemic’s effects.
