Uber IPO Ignites $70 Billion Rideshare Stock’s Ticking Time Bomb
The Uber IPO started the clock on a ticking time bomb, one that threatens to devastate this rideshare stock – and investors dumb enough to purchase it. | Source: REUTERS / Brendan McDermid (i), Shutterstock (ii). Image Edited by CCN
By CCN: Uber stock slumped toward a disappointing 7.62% loss following its blockbuster IPO on Friday, and the rideshare giant must now wrestle with an uncomfortable time bomb that has already started ticking.
That time bomb? Driver compensation – and the backlash it has already begun to generate.
Uber’s Alarmingly Low Pay Rate is Not Sustainable
Two of Uber’s foundational resources are drivers and their vehicles, without which they cannot pick up passengers. For there to be a sufficient number of drivers, there must be enough incentive in the Uber pay scale to recruit them.
In the early years, Uber pay was relatively attractive because drivers faced little competition. As ridesharing exploded, all these new passengers created additional demand for Uber drivers.
Basic economics dictated that the supply of Uber drivers would eventually equal or exceed the number demanded. That alone impacted the average Uber driver’s pay. More drivers meant less compensation, even as the size of the market expanded because driver supply grew more rapidly.
Seems like Lyft XD is taking some hits lately… Getting much worse. https://t.co/cBXrFDEs2z
— Harry Campbell (@TheRideshareGuy) May 10, 2019
Uber pay continued to decline because the company increased its commission while also decreasing fares to undercut the competition.
Last year’s report from the Economic Policy Institute found that Uber pay averaged $9.21 an hour after deducting labor,