Uber should offload its debt to increase its valuation. (with link to model)

 

Uber should offload its debt to increase its valuation. (with link to model)



With just 12% debt, Uber doesn't necessarily seem to borrow too much. But then again, the debt raised is costing the company too much through higher failure risk.

Why is Uber borrowing money? Maybe tax benefits? The main benefit of debt is that it is tax-deductible, and taxes don't exist for a money-losing company. So that's not right. I think the main reason for Uber to fund itself with debt is to not lose control over the company, not raise equity capital and dilute its shares. If so, the additional failure risk is not worth it.

Uber is still a young growth company and super unprofitable at the moment. And this unprofitability will require it to raise capital in the next few years in order to reinvest into the business.

Hopefully, this time no more debt.


Love to talk about it. 

Disclaimer: I own shares in UBER. This writing is for informational purposes only, is not intended to serve as a recommendation to buy or sell any security, is not a research report, and is not intended to serve as the basis for any investment decision.


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