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Uber Trucks Towards IPO Hauling New Debt

Published onOct 30, 2018
Uber Trucks Towards IPO Hauling New Debt

The impending initial public offering of Uber Technologies, Inc. (“Uber”) in the coming year has sparked an inquiry into their current business model. Uber is known for its ride-hailing services, a seemingly unprofitable business connecting drivers with passengers. However, Uber has made attempts to diversify their portfolio. Uber has implemented new platforms such as Uber Eats, while also making investments in a self-driving car unit, bike-sharing, and electric-scooter sharing. Uber is also entertaining the addition of a new tractor-trailer rental business to help truckers haul freight throughout the country. As of September 2017, UberEats was the most profitable division of Uber. CEO Dara Khosrowshahi stated UberEats is growing over 200%, on track to book $6 billion over the next 12 months given current rates. In an interview with CNBC, Khosrowshahi stated, “Going forward, we’re deliberately investing in the future of our platform: big bets like UberEats; congestion and environmentally friendly modes of transport like Express Pool, e-bikes and scooters; emerging businesses like Freight; and high-potential markets in the Middle East and India where we are cementing our leadership position.” The company has recently been valued by Goldman Sachs Group Inc. and Morgan Stanley at $120 billion based on these diversifications. 

On the rise is Uber’s target of the trucking and freight industry. Uber is set to announce a new division, Powerloop, a program connecting small and medium-sized carriers with fully filled trailers. Anheuser-Busch is among the companies participating in this new program. Senior Director of Logistics and Strategy at Anheuser-Busch, James Sembrot stated,“At Anheuser-Busch, we are constantly seeking new ways to make our supply chain more sustainable, efficient, and innovative.” As part of a trial, the brewer has arranged for about 250 trailers of beverages to be hauled through the use of Powerloop. With a strained trucking capacity in the U.S. and rising rates, this business venture is likely a gamble for Uber.

The lofty $120 billion valuation of Uber may be difficult to maintain given Uber’s slow growth. Uber’s net loss has grown in the second quarter of fiscal year 2018 to $659 million. Due to Uber’s privately held status, these numbers are given by Uber to its investors on a regular basis. Uber sold its first-ever bonds October 17, 2018, in preparation for its initial public offering. Investors’ confidence in Uber, despite a past record of continued losses, is apparent from the issuance of $2 billion dollars of debt for the upcoming IPO. Only time will tell if Uber will be successful in the various diverse ventures it has set out to pursue.

Amber Razzano is a second-year law student at Wake Forest University School of Law. She holds a Master of International Business and a Bachelor of Arts in Business Administration – Marketing from the University of Florida. Her practice area interests include corporate, labor and employment, intellectual property, and real estate. 

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