Author Topic: Uber Borrows $2 Billion in Debt Bond Sale  (Read 145 times)

YELLO

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Uber Borrows $2 Billion in Debt Bond Sale
« on: October 18, 2018, 12:29:56 PM »
The deal attracted enough interest from investors for underwriter Morgan Stanley to increase the size of the offering from $1.5 billion  to $2 billion.

Uber marketed its bond deal to a small group of investors in a so called private placement,  avoiding the reporting requirements the U.S. SEC placed on public stock and bond sales.

While Uber is on track to generate $10bn to $11bn in revenue this year, up from about $7.8bn in 2017, it still records steep losses as it spends heavily to subsidise rides and invest in new ventures, including autonomous technology, food delivery and electric bicycles.
https://www.google.com/url?sa=t&source=web&rct=j&url=https://amp.ft.com/content/d42763dc-d27f-11e8-a9f2-7574db66bcd5&ved=2ahUKEwjH95m5xZDeAhVNmlkKHVk0APMQyM8BMAB6BAgJEAQ&usg=AOvVaw1f-PuCSqzKIeKnB0-TV3Ma&ampcf=1
« Last Edit: October 18, 2018, 01:45:54 PM by YELLO »

YELLO

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Re: Uber Borrows $2 Billion in Debt Bond Sale
« Reply #1 on: October 18, 2018, 12:46:48 PM »
Michael Grimes makes more money than most of us. He’s a technology banker at Morgan Stanley, meaning he works with some of the most highly valued companies around and probably sees a fat multimillion-dollar salary. Despite this, Grimes still reportedly spent years driving an Uber car–not because he needed more money, but because he wanted a leg up on the other banking competition who are vying to help take the company public.

According to the Wall Street Journal, this is just one thing bankers have done to grab the attention of prospective customers. This long game Grimes reportedly played may pay off royally. If Uber chooses Morgan Stanley as its top underwriter, the bank will stand to make millions of dollars in fees. In essence, if his alleged ploy works, Grimes may get the biggest bonus any Uber driver ever did see.

The real question remains: After these businesses go public, how will they fare? While an IPO will raise money to keep them afloat and continuing to scale, how long will it take until investors see real profits?

https://www.google.com/url?sa=t&source=web&rct=j&url=https://amp.fastcompany.com/90253311/to-woo-uber-a-top-wall-street-banker-moonlighted-as-a-driver&ved=2ahUKEwjchqHvt5DeAhWmwVkKHXaZA5cQiJQBMAF6BAgJEAc&usg=AOvVaw1_MeJqoXswQEF3O0TegzMy&ampcf=1

YELLO

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Re: Uber Borrows $2 Billion in Debt Bond Sale
« Reply #2 on: October 19, 2018, 11:48:04 AM »
Last quarter, Uber's revenue was $2.8 billion, which is about 60 percent higher than the same period last year. That's an astonishing growth rate for such a large company. Yet growth is slowing, and the company isn't profitable. It lost another $891 million in the latest three-month period.

Even if the company manages to stanch the bleeding, ride hailing doesn't appear to be a big enough market to justify such a valuation. Annual revenue in the U.S. taxi and limousine business is about $26 billion annually, according to research outfit IBISWorld. Using America's share of global GDP as a rough guide, the world market is perhaps five times bigger, or around $130 billion.

Uber's gross bookings in the second quarter were $12 billion, and the majority of that comes from ride hailing rather than its side-business in delivering takeaway food. That suggests it has already captured a big chunk of that market. Moreover, competition is intensifying. A revitalized Lyft (LYFT) is also planning to list its shares - and if it does so before Uber, it could soak up capital to sharpen its edge.

Generous mooted valuations are appealing to company insiders, but they're also risky. Recall Saudi Aramco, which has suspended plans to list shares, having boxed itself into a corner by pursuing a $2 trillion valuation from the get-go. Where Aramco mainly drills oil, Uber can always argue to investors that it can grab share in other markets ranging from electric-bike sharing, autonomous vehicles and air taxis to whatever else may come along. The bigger the valuation, the more expansive its ambitions will need to be.

YELLO

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Re: Uber Borrows $2 Billion in Debt Bond Sale
« Reply #3 on: October 19, 2018, 11:51:22 AM »
We also learned a lot about IPO timing this week—and a little bit about how much to trust Uber Chief Executive Officer Dara Khosrowshahi's public statements. Khosrowshahi has said over and over again that Uber is targeting a public offering in the second half of 2019. But sources now say that he has started telling investors and bankers privately that the company wants to go public in the first half of the year.

There's a bit of gamesmanship at play here, which can partially explain the misdirection. Rival Lyft has been planning an offering in March or April. Now, the two companies will have to jostle for position or end up listing right on top of each other. That matters not just because the companies will divide investors' attention, but because both companies are watching the markets, worried that the current bull run may not last much longer.

We've also recently been getting a taste of how each company will cast its IPO story. While Lyft will focus on its market share gains in ride-hailing, Uber will emphasize the breadth of its business. Expect to hear more about not just picking up passengers, but the company's large stakes in Didi Chuxing, Grab and Yandex. That's on top of its autonomous vehicle program, its trucking businesses and its food delivery segment that bankers believe is worth double GrubHub's current $10.6 billion market cap. And I almost forgot about electric bikes and scooters!

It's become clear that Uber is going to be pushing a growth story wherever it can find one. For example, on Wednesday the company announced Powerloop, a program where Uber will rent out interchangeable trailers so that truckers don't have to sit around waiting for their cargo to be unloaded. Instead, truck drivers can just unhook one Powerloop trailer and replace it with another one and be on their way.

And then there's an experimental a program called Uber Works. The company is trying to build a flexible temporary staffing workforce to help other companies get things done, according to people familiar with the program but who asked not to be identified because the details are private. The program was reported first reported on Thursday by the Financial Times.

Why bother crowing about side hustles? It's hard to tell whether Uber is trying to distract us from its ride-hailing business, or if it's just earnestly a company that can do a lot of tangentially related things. Ultimately, we have to hope that Uber clearly breaks out its ride-hailing business in its IPO prospectus. That could answer the key question of whether its core offering is going to generate earnings. Uber might have a lot of irons in the fire, but even Amazon has had to prove to the markets at times that it can turn a profit when it wants to. Uber doesn't seem to be in any hurry to do that.


https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.bloomberg.com/amp/news/articles/2018-10-19/as-ipo-nears-uber-wants-investors-to-look-beyond-ride-hailing&ved=0ahUKEwiu0dfA65LeAhUK0FkKHXF2CykQyM8BCDgwBA&usg=AOvVaw0ZgZLj_S0v67RsuCLKNoDR&ampcf=1

YELLO

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Re: Uber Borrows $2 Billion in Debt Bond Sale
« Reply #4 on: October 19, 2018, 12:39:00 PM »
Khosrowshahi, in particular, found himself caught between condemning the apparent murder of a journalist, and acknowledging the fact that the Public Investment Fund had poured some $3.5 billion into Uber. (Yasir Al Rumayyan, a member of the Public Investment Fund, sits on the company’s board.)

Khosrowshahi, to his credit, didn’t blink. He pulled out of the conference immediately. That said, as one company insider familiar with the situation explained to me, “It’s a lot easier for Uber to make this decision, given that the money is already in Uber’s bank account; it’s not a new investment the company needs.”

Some people see Uber as a car company,” the person said to me. “Uber sees itself as the next potential Amazon.”

Still, there are plenty of people who see it as the next potential Yahoo. “Uber is a debt-crippled mirage of a company, worth nothing,” the writer Julian Gough posited on Twitter. “Its backers want to get their money out before the onrushing financial crash makes that impossible. Do not buy shares.” Gough predicts that rather than dance in a rain cloud of billions, “Uber will go bankrupt within three years.”

Unlike Amazon, which has re-invested its profits into its business, Uber is constantly chasing new parts of its old business. For example, a study released last year found that 96 percent of Uber drivers quit working for the company within a year. (It’s no wonder, when the company’s algorithms are misleading its drivers.) And as Len Sherman of Columbia Business School noted last year, the problem with Uber’s entire business model is that it chases an industry that was already financially broken. “The taxi industry that Uber is seeking to disrupt was never profitable when allowed to expand in unregulated markets, reflecting the industry’s low barriers to entry, high variable costs, low economies of scale, and intense price competition,” Sherman wrote. “Uber’s current business model doesn’t fundamentally change these structural industry characteristics.”

Uber might defend itself against this critique by saying that it is not trying to replace taxis, but rather provide a new platform for logistics altogether, and that includes one in which people no longer need cars. But I’ll say this: last summer I tried the no-car-only-Uber-and-Lyft thing, and it was way more expensive than owning a car, and totally and utterly impractical—not to mention the fact that my wife ended up with a Trumpian conspiracy-theorist Uber driver who was insistent that Hillary Clinton was secretly behind Watergate (not kidding) and personally got Richard Nixon impeached (yep!). The one place Uber could be incredibly fruitful, which critics don’t criticize, is with trucking and freight deliveries.
Uber certainly made it through one of the biggest burning balls of corporate excrement I’ve ever seen when it managed to quell its board chaos, oust its unruly and embattled co-founder, and recruit Khosrowshahi to take over. But that’s nothing compared to what it will face in its next chapter when Uber opens its books to go public, hits the public markets, and the dawn of driverless technology truly arrives. Within this time frame, as I have previously reported, many also expect Kalanick to try to retake his company once again. Khosrowshahi, who is set to receive a $120 million bonus if Uber goes public at a $120 billion valuation by 2019, might be perfectly wise to let him do just that.

https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.vanityfair.com/news/2018/10/uber-the-next-amazon-but-others-see-the-next-yahoo/amp&ved=0ahUKEwiu0dfA65LeAhUK0FkKHXF2CykQyM8BCDMwAw&usg=AOvVaw1SYGvJJt1AuSyxBUgTCHMY&ampcf=1

YELLO

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Re: Uber Borrows $2 Billion in Debt Bond Sale
« Reply #5 on: October 24, 2018, 11:57:50 AM »
Dear Mr. Berko: My stockbroker insists that Uber, which is valued at $120 billion, will come public in the second quarter of 2019. He doesn't have a price yet but promises he could get at least 100 shares at the initial public offering price. He says the stock could double on the first day and thinks I should buy more shares as the price runs up. He's extremely bullish. What do you think? Also, my sister, three of our cousins and I each inherited 227 shares of Zoetis. My broker wants me to sell all of mine. My sister's broker told her to round out her shares to 300. What's your opinion, please? — KC, Oklahoma City

Dear KC: Regarding your first question, he may be right, but I think he's wrong. Uber's ride-hailing service launched in San Francisco in 2011. During the past seven years, Uber, whose 600,000 drivers have given rides to over 70 million passengers, has managed to lose money year after year after year. Frankly, Uber may be unable to make money.

Uber won't publish financial results, but some Uber-watchers say the company lost nearly $5 billion in 2017, up from a $2.7 billion loss in 2016. Few companies have grown as quickly and lost so much money ($11 billion since 2011) in such a short time frame. Could Uber have developed Peter Pan syndrome — reaching a stage of maturity most companies never achieve and becoming deeply in debt and unable to make a profit?
I can't imagine, even in my most bizarre moments, how Wall Street decided that Uber is worth $120 billion. That amount is a "pump" amount to help Uber, which, as your broker says, may go public by mid-2019. A pump amount is an Arabic numeral with a dollar sign before it that fee-hungry investment bankers pull from their bums to encourage investors who are losing their enthusiasm. In this case, they may even raise it to $150 billion or $200 billion — even though Uber has publicly stated that it doesn't expect to be profitable for at least three years. Please tell me, in the name of all things good and wonderful, how an honest group of people could value a company that has only foreseeable losses at $120 billion. This sounds like an SEC- and FINRA-approved scam to keep new investors starry-eyed.

Meanwhile, some Uber employees who won't wait for an initial public offering are selling their shares at $33, which is a monumental discount to Uber's cockamamie $120 billion valuation. They could be the smart ones; that $120 billion, all puffery and promise, is about what the Big Three automakers are worth, combined. After the IPO, shareholders may be as mad as a foaming camel with a bad case of piles, though it's also possible they'll be as happy as hogs on ice in the winter sunshine.

https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.creators.com/read/taking-stock/10/18/uber-and-zoetis&ved=0ahUKEwjsu8eIs5_eAhWx1FkKHXg7CboQxfQBCDIwAw&usg=AOvVaw0Ie1jGyPkZTzd_gBJzmtNz

YELLO

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Re: Uber Borrows $2 Billion in Debt Bond Sale
« Reply #6 on: November 12, 2018, 02:27:59 PM »
Giant tech firms like Uber and Tesla are lapping up junk debt — here's ...
Business Insider

WeWork, Uber, and Tesla are banking on their brand-name appeal to pile on junk debt typically deemed too risky for lesser-known peers with better credit.
Investors are eager to lend to them, favoring companies' potential over their underlying financial health, because those chasing yield haven't had a lot of choice lately.
"In general, unicorns don't belong in high yield," one fund manager says.
Some of the biggest darlings of the tech industry have joined Tesla recently in piling on cheap debt to fuel booming growth plans, relying on their size and brand-name appeal to secure funding typically deemed too risky for lesser-known peers with better credit.

WeWork, rated B (otherwise known as junk), issued a $702 million bond in April. Uber issued a $2 billion junk-bond deal last month, despite rapid cash burn and growing competition. And while Tesla's precarious debt situation is nothing new, it's in a similar boat as the others. Tesla is giving some investors jitters because it has $1.6 billion of maturities looming over the next 12 months.

Investors are favoring companies' potential over their underlying financial health, in part because they're benefitting from the "halo effect" of their sexy, big-name brands, says Christian Hoffmann, a portfolio manager at Thornburg Investment Management.

It's a marked shift in the industry. Demand is growing, for now. But it's a risky scenario.

And then there's Uber. Its $2 billion bond deal last month was compared to deals by WeWork and Tesla because of the company's rapid cash burn as competition heats up with its rival ride hailer Lyft. Uber lost an eye-watering $4.5 billion in 2017. The company was able to issue its bonds via a private placement, allowing it to bypass the Securities and Exchange Commission's reporting requirements.

So-called leveraged loans have garnered a lot of negative attention lately, with former Federal Reserve Chair Janet Yellen and the Bank of England among those sounding the alarm on their potential risk. But the $1.6 trillion market is hot nonetheless: Responding to strong demand, Uber also raised a $1.5 billion leveraged loan directly from investors in March, a higher amount than the company had originally planned.

Leveraged loans differ from high-yield bonds in that they are secured, meaning creditors are paid before bondholders. Volumes have spiked in recent years with covenants protecting lenders from defaults deteriorating over this period, making the loans more akin to bonds.


https://www.google.com/url?sa=t&source=web&rct=j&url=https://amp.businessinsider.com/giant-tech-firms-like-uber-tesla-are-lapping-up-junk-debt-and-demand-is-growing-2018-11&ved=2ahUKEwirm7jAys_eAhXjYd8KHZerDQAQFjAAegQIBRAB&usg=AOvVaw1NEc4KGXwLbrWGJ7-jPy3q&ampcf=1