Uber Drivers Can Finally Own a Piece of the Company. Do They Want To?
(Bloomberg) -- Uber’s IPO was always going to be a bit awkward, even before the tensions about who would help ring the bell at the New York Stock Exchange surfaced. A handful of the company’s employees and investors are going to get very rich when the company goes public this week. The 4 million men and women who drive for the company, on the other hand, will be in the same economic situation they were last month, when Uber warned in a regulatory filing that it’d face serious issues if governments made it pay drivers the minimum wage.
Uber tried to offset that awkwardness when it filed to go public last month, by announcing a plan to pay cash bonuses to about 1.1 million drivers, while also setting aside IPO shares for them to buy. The ability to purchase such shares is generally seen as a benefit for insiders, because they get to buy them before the public, when trading begins and prices may rise. Uber’s moves mirrored similar actions by Lyft, who had its own restive drivers to placate when it went public in March.
In Uber’s case, the shares for drivers amounted to 3 percent of the total shares, or about $270 million. Drivers took the cash, albeit grudgingly in many cases. But it doesn’t seem like there’s going to be a run on the shares, based on interviews with a half-dozen drivers and the mostly negative reaction on online forums where drivers congregate. Instead, the IPO seems to be aggravating long-standing tension between the company and its drivers.
To be sure, some Uber drivers appreciated the chance to buy in. “I’ve never been offered stock before, and I’ve worked for some pretty well-known companies,” said Dina Williams, a driver in Tracy, California. Williams received a $500 payment from Uber last month. She’s planning on combining that with some of her own money and buying 20 shares, a transaction that should run about $1,000.
Williams said she had noticed the poor performance of Lyft’s shares; the company’s market value is down almost 20 percent from its IPO level. But she argued Uber has stronger prospects, citing its international business and food delivery service. Besides, Williams said, she likes driving and believes in what Uber does. “If you work for the company and won’t buy into them, why are you working for them?” she said.
That assumes a level of comity that hasn’t existed between Uber and its drivers for a long time. The company has been consistently beset by protests from drivers, ranging from work stoppages to confrontations with the company’s founder during a ride. The financial pressures of a public company are likely to make things even worse going forward. Uber is far from profitability, and warned in a regulatory filing that its plans to get there involve cuts to “driver incentives.” The company warned investors to expect rising tension. Drivers, who are already complaining of recent pay cuts, are planning a strike in several major markets on Wednesday.
The conflict has led to a sense of anticipatory glee, in some quarters, about the rough ride the amateur financial analysts on driver message boards expect for the stock. On Reddit, users offered to sell people interested in Uber shares proverbial bridges or, for particularly prudent investors, insurance plans on those bridges. One user on Uberpeople.net detailed three (presumably equivalent) investment strategies: buying Uber stock, buying 100 scratch-off lotto tickets, or just setting the cash on fire.
Carlo Garibay started driving for Lyft seven years ago after responding to an ad on Craigslist for a driving job that paid a flat $18 hourly wage. He soon signed up for Uber, too, and kept doing it because the flexibility let him take care of his two children. Garibay drove enough to receive $1,000 checks from both companies, and was tempted to buy Lyft’s stock with his payout. But after seeing Lyft lose its value, he’s avoiding Uber as well. “They’re not making any profits,” he said. “I’m not savvy as far as buying stocks, but in hindsight I could see that once they IPO, what are those investors going to do with their shares? Of course they’re going to sell.” Lyft declined to say how many drivers purchased stock, or the value of stock it sold to drivers.
Some drivers who plan on taking Uber up on its offer may not be the shareholders the company hoped for. Mike, a driver in the Bay Area who asked that his last name be omitted to avoid reprisals, has been driving for Uber for five years. His per-mile compensation has dropped by half over that period, but he said that doesn’t bother him, because he’s retired and enjoys the daily routine. “I’m still better off doing this than working as a Walmart greeter,” he said.
Mike plans to buy $10,000 in Uber stock. The company isn’t restricting drivers from selling their stock immediately, giving them a short-term opportunity over other early investors who are required to hold their stock for a certain period of time. “This chance to flip $10,000 work of stock and maybe make $3,000 in a few hours is an opportunity I’m willing to pursue,” he said.
Jay Cradeur, who drives for both Uber and Lyft, attempted the same maneuver during Lyft’s IPO. Cradeur, who wrote about his attempt at stock-flipping for the website the Rideshare Guy, a blog for ride-hail drivers, bought 13 Lyft shares for $72 each. Like lots of plans to make some easy money, this one ended up involving more work than expected. Cradeur found himself fixated on the fluctuations, and set up an arrangement with his broker where he would automatically sell his shares if Cradeur started losing too much money. "It’s a hassle to set up the account, learn how to sell, and then monitor the market,” said Cradeur.
Cradeur sold several days later at $75 per share, for a profit of $39, about what he said he’d make driving in one or two hours in San Francisco. He doesn’t plan to buy Uber shares.
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