Uber banksters claim Uber to be valued at17 billion dollars with a specu-lend model.
Uber’s financial backers Goldman Sachs, TPG Capital and partners are claiming that the Uber bubble is valued at 17 billion dollars. How do these banksters come up with these valuations? Do they actually use a dividend discount model or do they use specu-lend model to arrive a 17billion dollar valuations? Let us examine the valuations principles and compare with reality.
We all know that a company’s stock price rises if it’s experiences growth on net profits .This can only happen if the company continues to gain market share by providing riders with very good service at taxi prices. However after examining riders first experiences, reading these rider’s negative reviews and all the the controversy about Uber’s conflicts with insurance, licensing and bypassing regulatory issues, and litigation’s are not convincing that the company has a prosperous future. A company’s valuation is based on monetary growth.
Financial theory says that the value of a stock is worth all of the future cash flows expected to be generated by the firm, discounted by an appropriate risk-adjusted rate. According to the DDM, dividends are the cash flows that are returned to the shareholder. (We’re going to assume you understand the concepts of time value of money and discounting. To value a company using the DDM, you calculate the value of dividend payments that you think a stock will throw-off in the years ahead. Here is what the model says:
For simplicity’s sake, consider a company with a $1 annual dividend. If you figure the company will pay that dividend indefinitely, you must ask yourself what you are willing to pay for that company. Assume expected return, or, more appropriately in academic parlance, the required rate of return, is 5%. According to the dividend discount model, the company should be worth $20 ($1.00 / .05).
How do we get to the formula above? It’s actually just an application of the formula for a perpetuity:
Now that we have an idea about stock and price valuations. Let’s examine the specu-lend model. Specu-lend model is based on manipulation and speculation. The Uber marketing agents borrow and lend all creative ideas in speculating for hype build up. These speculative agents will bombard hype with fake reviews, creative press releases, and even hire fake actors in speaking highly about their service. In the 1980’s we have seen the fake body building products with fake heads mounted on bodies We have seen those ads with those actors lie outright in our face with claims as “ Guaranteed or your money back”, When examining the highly positively written reviews about Uber on Yelp and other places, they clearly demonstrate self written reviews with promo codes inserted within. Despite their efforts in massively writing positive reviews, the real negative ones counter their overall score and assign Uber a mid 2.5 on a 5.0 point scale. Aside from their reviews, the claims about black car cheaper than taxi is far from reality.
Uber speculating marketing team has been advertising that the UberX service is cheaper than a taxicab by 20% in New York City. These claims are found to be untrue when examining and comparing prices. For example Uber claims to charge $15.00 from Williamsburg Brooklyn to East Village, New York, whereas a taxi costs $16.00. Even if such were to be true, the real savings is only 6.66% -NOT 20%. In addition, the consumers who have been complaining about price gouging are certainly not returning customers.
A company cannot experience growth after losing their customers to price gouging. Some of these price gouges have been 2x, 3x, 4x-up to 10x.. Can a company seriously have double, triple, quadruple digits growth from loss of customers due to price gouge? How long can Uber continue to battle to press warfare? Can a company sustain on lies, speculation? Can Uber’s financial records justify the 17billion valuation?
Uber is not obligated to share its financial information with the public, though leaks of revenue figures and gross receipts have played nicely into its narrative of growth. A leaked document in December, for example, suggested that the company generated gross receipts (the fares paid by customers for rides) of $1.1 billion in 2013, which would translate into revenues of $220 million. If we buy into the assertion made by Travis Kalanick, Uber’s founder and CEO, that the company’s revenue are doubling every six months, updated values for both gross receipts and revenues should be higher. In estimating Uber’s value, I’m going to assume $1.5 billion and $300 million as my base year’s gross receipts and revenues
The question boils down to this, are you seriously growing every 6 months with continued speculation, fake reviews, discontented about poor experiences and price gouging, pending litigation’s, cease desist orders from regulating agencies, and the summons that come along with it?