Investor Fred Smith was dismayed to discover that the fact Uber has never turned a profit and is unlikely ever turn a profit is having a negative impact on the stock’s value.
“To be honest, I did wonder how a company that stayed in business by subsidizing every single ride with investors’ money could survive on the long term; maybe they planned to lose a little on every sale, and make it up on volume?” asks Smith, who admits he is not seasoned investor.
Uber’s stock had plummeted 42% since the IPO in May. On November 6 shareholders blocked from selling their shares were allowed to “unlock” and sell them; the stampede to the exit surprised even market watchers who had actually witnessed rats jumping off sinking ships.
“Before Uber released its IPO, my investment manager told me that if I wanted to get in on the ‘ground floor’ I needed to purchase the stock without seeing a prospectus,” Smith recalls. “No one told me the ‘ground floor’ had a basement.
“But then, Uber announced that in 2022, self-flying helicopters and would be delivering puppies and free ice cream. So, I’m selling my house to buy more stock!”