Uber is probably one of the most attractive companies out there for would be investors. They raised $1,2 billion in funding and are valued at $17 billion. Unfortunately, Uber shares are out of reach for most as the on demand car-sharing app remains a privately held company.
How can investors profit on that? It seems like investors are betting on Uber`s success. Take a look at Medallion Financial Corp, as the short interest has skyrocket from about 400,000 at the end of 2013 to 1,300,000 at the end of last month.
Medallion Financial Corp is a company that specializes in financing loans used to purchase taxi medallions. Uber is trying to make those taxi licenses worthless by creating its own private fleet of drivers and bypassing the medallion system entirely.
Medallion Financial has had a slowly but steadily declining earnings since 2012, and the short interest in their stock has increased by about 245%, and the stock price has been falling 17%, which is a bad sign.
Uber is one of several leading the vanguard of the sharing economy. The sharing economy is also called collaborative consumption. It is the socioeconomic model in which a pool of individuals all benefit from gaining access to physical assets without actually needing to own the underlying assets, which are often prohibitively expensive.
Property rights are still clearly defined in collaborative consumption models. A renter resulting in a more efficient allocation of the asset pool. Up until recently, matching a potential passenger with a driver looking to make a few bucks was nearly impossible logistically on a large-scale. Smartphones apps like Uber and Airbnb have made the process simple by acting as mobile accessible hubs for the efficient allocation of these resource pools.
Medallion Financial Corp may be the most obvious victim of Uber`s rise, but there are other potential losers later down the road as well. If Uber reach their goal with their success as a worldwide phenomenon, the rental car business may suffer as well. Uber is less expensive, and already cheaper than many city-regulated taxis and will become more competitive with car rental costs.
Avis Budget Group is the second largest publicly traded rental car company in the U.S, and the one which acquired car sharing company Zipcar in March this year for about $500 million. Zipcar is similar to Uber in the sense that it enables car-sharing.
The difference is that Zipcar owns its own fleet of cars, while Uber does not. That means much lower costs, and lower risk for Uber. Uber drivers provide their own car to become a driver, which is why Uber has a much cheaper cost structure than the other companies. Uber just takes a small commission for each ride for matching drivers with paying customers.
The largest publicly traded car rental company in the U.S is Hertz, and Enterprise is the largest car rental chain in the country, but it is privately held. Hertz is growing and its revenue is up by over 20% in the past four quarters, but in March they had a dip in the sales growth by 10% and a significant drop in earnings.
For all I know, Uber is planning an IPO anytime soon. We don`t know how fast Uber is growing as the financial information is not publicly available, because they are still a private company, but it seems like investors are placing their bets on Uber as a winner and the traditional yellow taxi cab companies as losers.
Reports today:
08:30 a.m EST Core Durable Goods Orders
08:30 a.m EST Final GDP
08:30 a.m EST Durable Goods Orders
10:30 a.m EST Crude Oil Inventories
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