Home Investing & Trading Why is Travis Kalanick Selling Uber Stock?

Why is Travis Kalanick Selling Uber Stock?

by Alan Daniel
Why is Travis Kalanick Selling Uber Stock?

According to the Financial Times and other sources, Travis Kalanick, the founder and ex-CEO of Uber, continues to sell Uber stock. Normally, depending on the scenario, that would be fine.

But that’s not great for Uber for a variety of reasons.

Let’s find out why.

The Market Soured on Uber From the Start

Uber went public earlier this year in May. The company found investor pushback early on that it would be best to re-price its market valuation prior to going public.

Uber learned from the Lyft, that high flying share price would not work and deployed shares accordingly. Unfortunately, Uber stock would decline over the rest of year before slightly bouncing back to where it is now.

The ride-sharing giant must focus on the bigger picture, refining its core business, and eking out profits, and most importantly, increasing its cash position.

Competition and Uber Stock

Uber isn’t the only ridehsharing company in the world. Go-Jek, Didi, Gab, and Lyft.

Remember that Uber has competition at home and abroad.

Lyft is the main competitor in the states while Ola, and others serve as competitors abroad. Each of these companies are trying to find a way to reach profitability and stay relevant to meet consumer demand.

The ride-sharing giant has its work cut out for it in terms of growth and longevity.

But there’s a flipside here, Softbank isn’t running around investing money into every ridesharing startup. Competitors in different segments of the industry are slimming down and thinking about consolidating. Public rivals like Lyft, which took a beating, can not play money losing games.

Regulation and Uber Stock

We know that Uber has always fought with governments as it rose to become a dominant brand across the world. Uber won many of these battles with various governments but it still has to overcome many regulatory challenges.

The two main challenges fall under classification of its partners, the Uber drivers, and varying safety transport laws in different jurisdictions.

Yes, unfortunately, Uber still spars with governments across the world from London to Germany.

Ex Uber Management Share Sales

Travis Kalanick, the founder and ex-CEO of Uber reportedly sold about 90% of his Uber stock over two months. That’s not a great sign of confidence in the future of the company. It looks like Travis is selling a sinking ship and that doesn’t bode too well for the stock.

Now Kalanick selling shares isn’t something that has substantially depressed the price of Uber stock. Surprisingly, Uber stock has bounced back from a low of $26.00 in November to $30.00 where it is now.

But Kalanick is still a part of Uber. He may not run day to day operations or be as heavily involved as he was before but he is still on the board of directors. Insider selling doesn’t provide outsiders with confidence, it may indicate he knows something that’s wrong with Uber that public doesn’t already know, or it may mean something else. Kalanick may be preparing to grow his latest startup, CloudKitchens.

CloudKitchens seems to be under the radar as it expands to different regions across the globe.

Will Uber Turn Around?

Investors generally have confidence in Dara Khosrowshahi, the current CEO of Uber. He’s doing what they expect, slimming down the fat, selling businesses like Uber Eats to competitors like Zomato, in places where it makes minimal sense to operate and he’s turning the culture around at Uber.

Khosrowshahi and team have partnered with strategic partners in emerging markets in South America, it has launched its Uber Works program which takes its on-demand concept and applies to other forms of labor.

In my view, Uber has to focus on two critical areas, staying a powerful consumer brand in the ridesharing industry while looking at further ways to innovate and provide value.

We’re seeing both of these higher strategies in actions such as investments in Ubers’ other modes of transportation such as Uber helicopters, and scooters that help it reach a wider audience while cutting down on non-viable businesses.

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