Uber’s Deep Losses Will Make Investors Question Whether This Time Is Different

People loved dot-com companies until they didn’t. Then they loved credit default swaps until they blew up. Now they love cash-burning companies.

…There’s a certain parallel to the situation Uber Technologies Inc. finds itself in today, ahead of an initial public offering. Uber was born in an era of low interest rates, when capital has been insanely cheap. At times it has cost people money just to hold onto cash. In this environment, investors have been happy for companies to burn through war chests chasing growth. Uber happily obliged, tallying operating losses of more than $10 billion in three years. It’s one of the best companies in the world at burning through people’s money.

…Of course, if it were so easy to separate money wasters from business visionaries, there wouldn’t need to be a market. Uber and DoorDash Inc. (who Maloney is probably considering when he talks about money wasters) are going for a land grab. For now, GrubHub’s stock is down this year, while Uber is targeting a valuation of as much as $90 billion in its IPO.

…Uber imagines just such a scenario in the risks section of its IPO filing. It might need to use “a substantial portion” of its cash flow to pay off debts at some point. That could, Uber writes, “heighten our vulnerability to downturns in our business, the industry or in the general economy.”

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