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Uber - "The most stupid business in history"

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Uber's practice of persistently raising capital from private investors is akin to a Ponzi scheme, according to veteran investor and Magellan Financial Group chief executive Hamish Douglass. 

In a candid interview at the Stockbrokers and Financial Advisers Conference in Sydney on Wednesday, Mr Douglass lamented the dramatic losses awaiting Uber investors as automated driving technology permeates the market.

"I see Uber as one of the stupidest businesses in history," Mr Douglass said. "The probability of this business not going bankrupt in a decade is like 1 per cent."

Pointing to Uber's high-cost, owner-driver model and what he described as its almost "valueless" user base, Mr Douglass said the San Francisco-based business' capital-raising style was like a "Ponzi scheme".

"They've got no advantage over anyone else when it comes to autonomous driving technology. They tried to steal it from Google, they've ended up in court. That whole side of the business is falling apart. It's constantly losing money and it's capital-raising strategy is a Ponzi scheme.

 

http://www.smh.com.au/business/markets/magellans-hamish-douglass-says-uber-is-a-ponzi-scheme-20170523-gwb701.html

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One of Australia's wealthiest and most high profile investors, Hamish Douglass, appears to have engaged in "new economy heresy" – calling out the ride sharing company Uber as being a Ponzi scheme and one that will be broke in 10 years.

It's a sobering perspective for the millions of fans just salivating at the prospect of the San Francisco based becoming a public company as early as 2017.

Douglass, that co-founded the company that manages $50 billion in investment funds, takes the view that Uber's theoretical value is based on its continuous raising of money at higher and higher prices.

And even in the sharing market there has been no shortage of new competitors. In addition to the now-defunct US operator Sidecar, companies like Lyft, Curb, Southeast Asia-based Grab, India's Ola, have all started to eat into the ride-hailing market share, becoming huge competitors for Uber. It's a market in which Uber should have the advantage of scale but new entrants can be expensive to ward off.

He also points to the fact that Uber has no particular advantage when we move to the next point of disruption which will be driverless cars.

Douglass has plenty of praise for other large businesses – he loves Amazon's Jeff Bezos and his funds have made a great return on Apple.

But when it comes to Uber he makes a very strong conviction call,

"I see Uber as one of the stupidest businesses in history."

 

http://www.smh.com.au/business/comment-and-analysis/the-death-of-uber-australian-investor-predicts-company-will-be-broke-in-10-years-20170524-gwc8gt.html

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Basicallly Uber exists so the company can exist without having to own the maintenance on transport vehicles.  When I had the partnership in Central City we did parking lots, shuttles, and a few services for casinos. The vehicle upkeep was pretty high overhead and kept our profit margins clipped with no real way around those costs.  To have drivers use their own vehicles and not be responsible for maintenance and upkeep would have been a windfall for us. 

Yet despite - their business is going to fail way before technology sinks them. They have a completely stupid set up.  I tried to get ahold of them to see about a reservation so I could just leave my rig at home when I flew to my Dad's for Christmas.  They wanted me to download an ap on a device that I didn't own. So I tried to contact their CS dept since most taxi services didn't go to my town. At all. Nor did buses.  So I got on the CS and somehow those idiots, after a few emails, still couldn't understand I just wanted a one time transport,  signed me up as a driver and I started getting "paystubs" for 0 amount and continual flags in my email to finish signing up as a driver.  It took me 2 months to get them to figure it out.  I never did get a reservation for a ride. The price was damned close to a regular taxi anyway.  I've also heard some real horror stories about some of the drivers being less than sane or honest. 

Dealing with them didn't give me the feel of an up and coming business giant.  I got the feel that the owners just had a setup that would get them some nice scratch temporarily and they'll ditch it off when the lawsuits and complaints start to get too risky.  If they fold out tomorrow, they've already made some really good cash from their scheme. 

 

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Just giving this thread a bump as the Uber IPO is apparently being priced this week, and in case some on here are thinking of getting in on it. As far as I can tell, nothing has changed for the company's prospects, except that more and more Uber drivers are joining class action lawsuits against the company.

As with every other IPO, caveat emptor*, however in the case of Uber, that warning is exponentially more pronounced.

 

* Buyer beware.

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On 5/14/2019 at 1:13 AM, Wunderkind said:

Seems like a great short play.

Could be. The share price has been hammered, but it's hard to tell whether that's because of investors waking up to its prospects, or it's just being hammered along with the market in general.

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