Uber’s Loss Of Its London License Is Just The Tip Of The Iceberg For This Easy-To-Hate Company
Welcome to sunny London! Having lived in the UK’s capital for many years, I can attest that the greetings bestowed on newcomers are often hollow. Having just visited London a month ago, I can attest that Uber has been in the same situation.
This morning London’s transportation regulatory authority, Transport for London (TfL,) denied Uber’s request for an extension of its operating license. Uber had been operating under a 2-month extension to a 15-month license that was originally granted in June 2018 and expired in September. Under the TfL’s rules, Uber has the right to appeal to a London magistrate, and Uber CEO Dara Khosrowshahi has indicated that the company plans to do so. Thus, Uber is allowed to continue to operate in London pending the outcome of that appeal.
Traveling around London is never easy, as it is a sprawling mass that New Yorkers could never comprehend. London’s public transport, now encompassing an Overground system in addition to the famous Underground, works reasonably well in TfL’s Zone 1, but it is when one ventures out into Zones 2, 3, etc. that the weaknesses of the system emerge. Therein lies the opportunity for Uber, just as the real opportunity for Uber in New York City is in the “boroughs,” particularly underserved parts of Brooklyn and Queens, which is my home borough.
The most likely outcome is that Uber and TfL reach a compromise, but the size and scope of the allegations alleged by TfL are amazing. TfL’s release noted a stunning 14,000 instances in which unauthorized drivers were able to upload their photos to Uber driver accounts. Thus, according to the TfL, all those journeys were actually uninsured and some actually took place with unlicensed drivers. That glitch in Uber’s app also allowed for dismissed or suspended drivers to carry passengers, according to the TfL.
So, that is the real downside for Uber and its stock, which is down on today’s news and has performed terribly since its May IPO. Uber shares have recovered somewhat in the past two weeks after their post-IPO lock-up expiration plunge—which I detailed in this Forbes column—but Uber is worth just under $50 billion today, versus the heady days prior to its IPO, in which valuations north of $100 billion were mooted for the ride-sharing giant.
I don’t like Uber’s service and my firm, Excelsior Capital Partners, has made sizable profits several times since Uber’s IPO via bearish options positions. It’s common braggadocio among millennials to say “my Uber rating is 4.97” (on the five-star scale that is granted by Uber’s drivers.) I just checked and my current Uber rating is 3.67.
I have had the same terrible experiences with Uber drivers that I have with New York City’s infamous yellow cab drivers, and I exclusively use Lyft instead. I also have many friends in New York who prefer to ride with Via, a privately-held entity whose shared-ride architecture in Sprinter vans (Daimler is an investor in Via) really optimize urban mobility and actually reduce vehicle miles driven and vehicle population, while Uber has done just the opposite.
So, that the risk for Uber. In this maze of regulatory rigamarole, potential customers simply start to dislike the company and choose alternatives. Uber has no “moat.” It’s just an app. The Uber app’s forboding black color seems to denote a company that has the potential to be perceived negatively by consumers. That has certainly been my personal experience.
For whatever reason, customers preferred Facebook over MySpace (I always liked MySpace) and the rest is business history. Uber and its shareholders are now in the precarious position now of having to withstand a constant barrage of negative publicity, both from regulators and from true crime reporters. I can envision a scenario in which Uber becomes the MySpace to Lyft’s Facebook, and I am continuing to explore ways to bet against Uber’s stock.