Seeing Lyft and Uber go through the shredder on the stock exchange over the past couple weeks gives me the feeling that we might be in for the next dot.com crash ... 🤔
Did you know that Uber’s losses were close to $4 billion in 2018 and over $4.5 billion in 2017. For a company thought to be worth an $120 billion it boggles my mind how this all makes sense. What are these eye watering evaluations based on and how can they be sustainable long-term if the company keeps on bleeding?
It seems like there's never been a time in history where it's been so "hip" to be billions in debt. I'm no economist or financial guru, so maybe what I'm writing is a load of garbage. But this just doesn't make sense to me.
Of course it's not to be discounted that these technologies have disrupted the world and there's no going back. But it's hard to be certain about the future when these tech "giants" that are seriously deep in the hole. For example:
- Snap Inc - (Snapchat) is rapidly running out of funds – despite its US$24 billion listing in 2017. Here's a current rundown of it's financial statement's:
- 2015: -$372,893,000
- 2016: -$514,64,000
- 2017: -$3,445,06,000
- 2018: -$1,255,911,000
- Pinterest - While many speculators think Pinterest is just scratching the surface of it's potential, it is still incredibly hard to justify it's $15+ billion evaluation.
- 2017: -$130,044,000
- 2018: -$62,974,000
- Lyft - was the first of the ride-hailing app's to go public in 2019. While there is no doubt both Lyft and Uber have impacted the way we use transportation globally, it's still hard to look beyond their financials:
- 2016: -$682,800,000
- 2017: -$688,300,000
- 2018: -$911,300,000
I don't know about you but I bet even a first-grader with a lemonade stand could understand this simple mathematical concept:
"These companies are losing $$$ because they spend more money than they bring in."
The only big winners in these scenario's are the private investors who got in early and are now cashing out. According to Business Insider there will be thousands of new millionaires in 2019 due to these incredulous tech IPO's.
Reiterating the headline of this post: Most of the dot-coms which listed on stock exchanges back in the late 90's and early 2000's had done little more than consume vast amounts of investor cash without shoeing any prospect of achieving a profit.
Traditional metrics like profit and loss are often overlooked when VC's, angel investors and investment firms keep the blaze alive by continually throwing cash at the problem. Disruptive technologies are expensive and poor choices are undoubtedly made when startups grow so fast.
Will these companies die? Likely not, but I sure hope this kicks some sense into any other startup wishing to be the next Uber, Facebook or Pinterest. Maybe there will be a crash, maybe not? What is certain is that this kind of business model will not be sustainable and eventually the hype will boil over.
Thing is, why can't we just learn from the mistakes of others in the past? History has a tendency to repeat itself, which in the end, makes us all look like idiots. We're like a civilization with amnesia befuddled by quick profits and greed.