Key points:
- The ICIJ has a big report about how aggressive, capitalist, Uber as a company is
- As investors we rather like management being aggressively capitalist
- So is this report really a negative for the Uber stock price?
Uber (NYSE: UBER) stock is down 2.25% premarket this morning as there's a flood of newspaper headlines about how awful the company is. The Guardian is running it as their headline story, it's all backed by thousands of files that have been reviewed by the International Consortium of Investigative Journalists. The actual claims are that Uber is run by vile capitalists who will break rules and lobby politicians in order to do what's best for the company, not the society at large.
Well, yes, and? This is supposed to make us think that the Uber management have not been working hard and well on behalf of us as investors and or shareholders? Aggressive management is evidence that the company should be worth less? That might well be one of those arguments that doesn't stand up to analysis when we come to think of it.
What we might be seeing here – might, obviously – is that clash between how fairly lefty – and the ICIJ are certainly that – journalists see capitalism working and how we, as investors, hope it works. They thinking that things should be done for the good of society and we hoping like heck that they're being done for our, capitalist, benefit. Which does rather change the calculus on whether we desire to have aggressive managements or not.
Also read: How To Buy Uber Shares.
Within the revelations from this project there's nothing which is actionable. In the sense of here is Uber, or Uber management, having done something for which anyone can now be prosecuted – or even fined. So in that sense of legal responsibility there's nothing. What there is is a great deal of complaining by varied progressives about how aggressively capitalist Uber always was. We as investors might not see that as a negative of course. It's also difficult to see how the company could have started up at all without being aggressive and pushing the limits.
Which brings us to the valuation of Uber stock itself. There might well be a certain dip in the Uber price as a result of this report simply because some investors will be put off by it. But while that's a good indicator of short term stock values – how many investors want it? – in the long term the Uber stock price is going to be driven by the performance of the company itself. This report is going to make no difference to that in the slightest.
We are, therefore, back to fundamentals in our Uber valuation. The company is most certainly embedded in normal life now, even to the point of having become a verb. The question is going to be how much profit can be made out of that position? The real and fundamental analysis of the business that is, by how much will revenues beat costs over time?
This isn't something addressed by this report and so this report is irrelevant to a longer term valuation of Uber. It might cause a short term dip in the price but dependent upon views of that future perhaps that will just be a buying opportunity?