Thursday, September 5, 2019

Bad news about unicorns in both the USA and China

The following two articles illustrate the bad news across the world on unicorns....  Aivars Lode

Uber and Lyft close at record lows as investors lose faith in ride-sharing companies

Shares of Uber and Lyft fell to fresh lows on Tuesday, posting their lowest close ever, as the ride-hailing companies face growing skepticism from investors.
Uber closed down 5.7% to $30.70, falling below its previous low of $32.57 on Aug. 30. Earlier in the day, the shares hit an intraday all-time low of $30.67.

Lyft experienced a similarly steep drop, ending the day down 7.2% to $45.42, compared to its previous low of $48.15 on May 13. The stock dropped as low as $45.40 on Tuesday, touching a new intraday low.

Both companies have had a particularly rough ride on the public markets since their respective IPOs earlier this year, as investors continue to question whether Uber or Lyft can achieve profitability in the future. Uber and Lyft were trading on Tuesday more than 30% below their IPO prices of $45 and $72 a share, respectively.
Uber reported a net loss of $5.24 billion for its second quarter of 2019, blaming stock-based compensation costs. By comparison, Lyft lost $644.2 million in the second quarter, representing a significant jump from the $178.9 million it lost a year earlier.

A proposed California law could also represent a major threat to Uber and Lyft’s business models should it pass through the state Senate, as it would force the companies to reclassify their drivers as employees. The bill passed the California Assembly in May and California Gov. Gavin Newsom voiced his support for the bill on Tuesday. Meanwhile, Uber and Lyft have pledged $60 million to a ballot measure that would keep drivers’ classification as contractors.

Lyft and Uber’s leadership have tried to assuage investors’ concerns about their businesses by painting a path to profitability. Lyft CFO Brian Roberts said he believed peak losses for the company were last year, while Uber CEO Dara Khosrowshahi characterized the second-quarter loss as a “once-in-a-lifetime” hit.

Those efforts have swayed some Wall Street analysts who say the price war between the ride-hailing businesses has eased, indicating Uber and Lyft could turn a profit in the near future. In a Aug. 27 research note, Ronald Josey, an internet analyst at JMP Securities, said said data from a recent survey found many riders don’t compare prices between the two services, “highlighting the inelasticity of demand.” Josey holds a Market Outperform rating on both Uber and Lyft.
“With fewer users price comparing between services as ride sharing services compete on brand and product, we believe pricing could continue to be rational,” Josey said.

By Annie Palmer - CNBC Tech Markets

The Venture Capital Boom That Backed The World’s Most Valuable Internet Startups Has Lost Its Steam

Chinese startups from ride-sharing giant Didi Chuxing to media and entertainment juggernaut Bytedance once raised record amounts from the country’s private investors. But this investment boom is petering out rapidly as people are a lot less certain of finding gems amid a global stock market slump.
Speaking on the sidelines of Forbes Asia’s Under 30 Summit in Hong Kong in July, several young venture capitalists and list honorees said worthwhile projects were increasingly hard to come by, especially as more established companies had already built their ecosystem of services and transformed major consumer markets. What’s more, investors are also worried about diminishing returns as the escalating China-U.S. trade war drags global equities lower, clouding their exit strategies.
“The slowdown is very pronounced, and a lot of investors are quite anxious,” says Liu Yuan, managing director of Beijing-based ZhenFund. “We haven’t identified the next big platform in China yet after mobile internet, while the latter has already changed how we live, commute, order meals and shop.”
As investors hold back, equity investments in Chinese startups have plummeted. In the first half this year, equity investment in China’s private startups fell 59% to 261 billion yuan ($37 billion) from a year ago, while funds raised by private equity investors fell 20% to 573 billion yuan, according to Beijing-based investment and research firm Zero2IPO Group. The steep drop stands in sharp contrast with the booming environment in 2018, when Bytedance, parent of the popular TikTok short video app, raised $3 billion at a $75 billion valuation that made it the world’s largest internet startup.

By Yue Wang - Forbes

No comments:

Post a Comment