Uber Admits It May Never Be Profitable

Ride-sharing app Uber has finally admitted that the company may never be profitable, reminding many of the dot-com crash of the 2000’s.

Business Insider reports that ride-sharing company Uber filed to go public this week, publishing a 300-page prospectus for would-be investors which outlined the operations of the $11.3 billion business. Hidden amongst this prospectus was one incredibly important detail: Uber admits that the company may never be profitable.

Uber posted a $3 billion operating loss last year but many expected the company to at some point become profitable. But within the company’s own prospectus, Uber states: “We expect our operating expenses to increase significantly in the foreseeable future, and we may not achieve profitability.”

The IPO documents contain a number of risks that the company faces, such as huge spending on drivers, “unproven” revenue lines, and the fact that Uber makes a loss on its partnerships with some companies such as McDonald’s which utilizes the Uber Eats app. The document further states: “We will need to generate and sustain increased revenue levels and decrease proportionate expenses in future periods to achieve profitability in many of our largest markets, including in the United States, and even if we do, we may not be able to maintain or increase profitability.”

Uber is not in unusual in the fact that it’s not making a profit yet, in fact, according to research from University of Florida finance professor Jay Ritter, 81 percent of U.S. companies that held an IPO last year did so as unprofitable entities. But what is worrying is that a similar situation took place during the dot-com crash of the early 2000’s.

The last time that this many tech firms went public without actually being profitable was in 1999 and 2000. During this time, 86 percent of the internet companies that went public on Wall Street were unprofitable. It wasn’t long before major firms at the time such as Pets.com and Kozmo.com went bust and Silicon Valley saw a recession resulting in the loss of 200,000 jobs.

Uber is expected to be the biggest IPO of 2019 with an estimated worth of $100 billion, but with many other tech firms such as Pinterest and AirBnB also planning IPO’s, tech firms would do well to learn from the mistakes of the dot-com crash.