ADVERTISEMENT

Ride-Hailing Startup Juno Battered by Regulation, Lawsuits

Revenue at Juno, which launched in 2016, slumped 34% annualized for the nine months to Sept. 30. 

Ride-Hailing Startup Juno Battered by Regulation, Lawsuits
The Juno Inc. application is demonstrated for a photograph on an Apple Inc. iPhone in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)  

(Bloomberg) -- A forced pay-raise for drivers and bevy of lawsuits drove ride-sharing startup Juno into bankruptcy, according to court papers filed in the case.

Juno’s owner, Tel Aviv-based Gett Inc., unplugged the ride-sharing app on Monday night, marking what may be the first corporate casualty resulting from New York Mayor Bill de Blasio’s effort to boost pay for drivers and cut congestion on the streets of the city.

Juno USA LP formalized its demise when it filed for Chapter 11 bankruptcy in Delaware on Tuesday, in large part blaming rules implemented in February that require drivers to earn at least $17.22 an hour regardless of how many rides they perform, Chief Restructuring Officer Melissa S. Kibler said in a court declaration.

Revenue at Juno, which launched in 2016, slumped 34% annualized for the nine months to Sept. 30 after the wage floor went into effect, Kibler said. The company generated $269 million in 2018, an increase of about 23% over the prior year. Rides per day fell to fewer than 25,000 before the bankruptcy compared with some 47,000 rides per day in 2017.

“Juno was a player that started with a lot of promise,” Bill Heinzen, acting commissioner of New York’s Taxi and Limousine Commission, said in an emailed statement. “But ultimately if you’re not able to pay your drivers a fair wage and are not able to operate in a way that’s environmentally responsible, then you probably shouldn’t be operating in New York City.”

Liquidation Plan

The Taxi and Limousine Commission is the body that signed off on the new wage rules last December. Kibler said in her declaration that average hourly earnings for its drivers decreased this year because Juno didn’t cap the number of drivers that could use its app at once, which factors into how wages are calculated under the new rule.

Juno was also bleeding cash defending itself from lawsuits, Kibler said, resulting in “hundreds of thousands of dollars per month” in legal fees. The legal battles ranged from accusations of patent infringement to personal injury claims by riders and unemployment insurance suits from drivers.

Court papers show that Juno plans to liquidate its consumer operations and form partnerships with competitors for corporate transportation. While announcing Juno’s shutdown, Gett simultaneously said Monday that it would team up with Lyft Inc. A notice posted to Juno’s website informs riders and drivers their information won’t be passed on to Lyft.

Size may help Juno’s bigger competitors to better weather new regulations, Kibler said. Uber Technologies Inc., for example, reported more than $11 billion of revenue in 2018.

The ride-sharing industry has fought hard against regulations like the wage hike, which Juno’s parent called “misguided.” Uber sued New York over a cap on the number of ride-sharing vehicles allowed on its streets, but lost that fight earlier this month.

Juno has a first-day bankruptcy hearing scheduled for Thursday at 10 a.m.

The case is Juno USA LP, 19-12484, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Jeremy Hill in New York at jhill273@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Nicole Bullock, Christopher DeReza

©2019 Bloomberg L.P.