Elon Musk is probably way too busy, so maybe it'll be a job for another enigmatic billionaire, but, what are the chances Uber follows Twitter to become the next surprise mega-money takeover?
A glance at the stock price suggests Uber has lost its way, and a discount price tag may leave it vulnerable to a cut-price offer.
Uber Technologies Inc (NYSE:UBER)’s shares are down 30% to US$30.68 in the year to date, driven by a difficulty to ever turn a profit as well as still reeling from the pandemic.
The gig-economy pioneer has endured an underwhelming three years since its US$45 per share IPO, aside from the pandemic spike - up to an all-time high of US$60.63 - as its takeaway food delivery boomed during the depths of lockdown.
Quite intriguingly, its movement on the market over the last year mirrored that of Twitter.
Both tech stocks were down roughly 50% over the last 12 months, at least up until Elon Musk’s US$43bn bid for the social network.
The question now is whether a buyer might similarly seek to buy Uber out of the doldrums.
Both companies have similar backstories including big stock market sumps, legal and regulatory challenges, and disruptive impacts for commerce and politics.
What’s the state of play?
Uber is set to report on its first-quarter earnings next Wednesday.
News that UK-based Addison Lee returned to profitability as Covid restriction perhaps bodes well for Uber.
UBS believes as much, with the Swiss Bank this week saying that rideshare services like Uber will benefit “from increased mobility as the pandemic fades, travel activity ramps and more workers return to the office.”
Nevertheless, the food delivery service will likely be less upbeat, UBS said, but the bank still expects a "solid first quarter."
UBS also notes that food delivery is much more likely to be hit by macro-conditions like inflation, given spending in the sector is generally discretionary.
Is Uber’s performance part of a wider tech problem?
Uber is among the Silicon Valley stocks to have cooled significantly over the past twelve months.
Tech stocks have endured a tough start to 2022 and the Nasdaq closing at its lowest point in nearly a month this week having now dropped more than 20% in the year to date.
According to Richard Jeans, an analyst at Proactive Investors, the sector enjoyed “an amazing run during the pandemic” but now faces much stronger comparatives in 2022 and users are having to deal with inflation and rising interest rates.
War in Ukraine further rumbled investor sentiments, and tech has been among those hit hardest.
Is Uber primed for a buyout?
Uber is still in a strong position in terms of its ride business, with data from Statista highlighting it still has a 76% market share in the UK and a 69% market share in the US. Meanwhile, for food delivery it has a 27% market share in the UK, just behind JustEat, while it has a 26% share in the US, although that is half of DoorDash.
According to Susannah Streeter, senior analyst at Hargreaves Lansdown, there is bound to be speculation that Uber can be a takeover target.
Unsurprisingly, a possible stumbling block in the way of any takeover would be what’s perceived as a premium valuation. In the market, Uber’s shares price the company to be worth some US$60bn, which is notably a lot more than the US$43bn Musk will pay to buy Twitter.
Any “would-be suitor would have to have even deeper pockets” than the Tesla chief executive,” Streeter highlighted.
The company is still reeling from the impact of the pandemic and has plenty of legal and regulatory issues it must deal with, such as lawsuit in Australia over misleading customers over its share price, there is obviously “hesitancy to take on its sprawling network.
While Uber still has to turn itself around towards a sustainable model as well as dealing with all these mounting legal issues, it’s no surprise that no one has made a firm offer for the firm just yet.
So that begs the question, who, if not Elon Musk, would be willing to fork out the huge amount of cash needed to buy the business, and has the ego of Musk to believe they can turn it around?