Wednesday, March 27, 2019

"Ride-hailing, Fracking, Capital Hunger, And Future Profits"

Alex, I'll take "three realities and a dream" for $1000 please.

From Crunchbase:
Morning Markets: I’m a bit jet lagged, but walk with me. We’re talking endless fundraising and growing losses.
The world’s ride-hailing companies need more money.

The revolution that Uber kicked off and a host of startups around the world are racing to complete is a cash-hungry business. Happily for the founders in the space, the business of ride-hailing generates one thing that investors do covet, namely growth.

And that spells big investment dollars. Uber and Lyft have raised billions apiece. Didi and Ola have raised billions apiece. Go-Jek and Grab have raised billions apiece. And none of them, so far as I can tell, generate profit. Indeed, the collection of companies are neck-deep in losses, deficits that show few signs of drying up.

And that means that the group of companies needs more money. And they are out to get it. Lyft’s IPO is set to raise $2 billion, we recently learned. That’s a fraction of the company’s raise-to-date, but is still a staggering sum of money for a company whose competitive edge seems to be its brand.
And even more, recent news has Ola, the India-based ride-hailing leader, raising another $300 million. You’ll forget about the Ola round by lunch. After all, it’s just another few hundred million into a regional ride-hailing shop. It’s not like it’s a big deal.

More notable than simply the titanic sums of capital that the ride-sharing world has raised is how far it remains from making money. The ever-excellent Shira Ovide tweeted something this morning from the Lyft IPO roadshow:
Note that at some point in the future Lyft expects its “Adjusted EBITDA Margin” to reach 20 percent. That’s pretty slack, and the news gets even worse. Here’s more from Ovide:
I had to *really* squint to read the footnotes. “Adjusted” Ebitda excludes: depreciation and amortization, stock pay, charges to insurance reserves, acquisition related costs, income taxes and interest. Ok!
In short, Lyft will, at some point in the future yet to be determined, generate 20 percent profit margins on its revenue, provided that we exclude an incredible slurry of material, GAAP costs from the calculations. The only way I can read the chart’s figures and its explainer text is that Lyft expects to never make money, and it wants you to know it....MORE
Also at Crunchbase:
As Lyft’s Public Offering Looms, A Reminder Of Where The Year’s Unicorn IPO Crop Stands