Realist, not conformist analysis of the latest financial, business and political news

Taxi Ride Anyone?

So here we go again. Just as the dust settles on that deflating balloon that was the Lyft initial public offering along comes another taxi seeking your hard-earned pennies. We have the Uber roadshow! Bigger. Better and with more accessories than before, but still after your hard earned cash, as you can read here:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Uber is expected to seek $10 billion in IPO[/perfectpullquote]

Wow! You know that loose change you lost down the back of the sofa, well now’s the time to get the metal detector out and find it. Why not double up on Uber, having made such a success of the Lyft floatation?

Since Lyft listed, its stock has only gone one way. Down. As of recently it was around $60-62 compared to an IPO price of $72, if you’d got it at that price and not in the inflated after-market. So, you’d be nursing losses of around 14%–or more.

Now Lyft was small change compared to what’s being asked here. The conservative valuation put forward is $100 billion. Yes, that’s right, about 20 cents per human on the planet even if they prefer to go by Shank’s Pony rather than be taken around by an Uber Mensch.

It’s all a bit of hype, don’t you think?

We’ve been here before. The dotcom bubble is one such episode. As were tulips in Holland or the South Sea Bubble. It can only end in tears as is reputed that someone mistook a nice tulip bulb for an onion and ate it. Probably a better use of your money than flinging it at Uber. All the issues we wrote about concerning Lyft apply in spades with Uber. This is what we said at the time:

[perfectpullquote align=”left” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Let’s look at this with a bit of financial logic. There are few barriers to entry to becoming an Uber or a Lyft. Or one of the other ones out there (e.g. Groundlink, Grab, Gett, and Didi Chuxing). It’s not, to use a nice phrase from Warren Buffett, as if Lyft have a deep moat around the business providing them with a nice little rent over and above that pure competition stuff of normal return. No sirree. All these new firms are pretty much interchangeable. You just need a few more apps from the store.[/perfectpullquote]

Now, we’re ratonal economists here at the Continental Telegraph. We struggle, yes, struggle, to understand how anyone can seriously be putting all those pennies they’ve collected into another hyped up taxi company at such a fancy valuation. And with the Lyft experience behind them. Fool me once, shame on you; fool me twice, shame on me.

But as P.T. Barnum said, “There’s a sucker born every minute.” And you want to know why your investment returns are so low!

Perhaps a bit unmensch of us to point out the latest flaws in the get-rich-quick-scheme-of-things, but there you go, economists always tend to rain on any parade. Even when the sun shines.

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