Why the Uber Strike Should Make Investors Uneasy
Thu May 09 2019
Mark Cooper (2445 articles)

Why the Uber Strike Should Make Investors Uneasy

Uber and Lyft drivers typically roam the streets to pick up passengers. Today they’re taking to the streets.

Today thousands of Uber drivers in cities around the world including Los Angeles, New York City, Philadelphia, Washington D.C., Chicago, Atlanta, Boston and even London are planning to strike just two days before the company’s expected $ 9 billion IPO. Their demands vary, but their wishlist generally includes: a living wage, greater transparency over fares, more job security, and in some cases, benefits.

Lyft and Uber investors should watch out: it may be more than just noise. With lawmakers taking drivers’ concerns more seriously in recent years and this happening against the backdrop of the windup to the 2020 presidential elections, these protests may last beyond Uber’s IPO, and could even hurt the firm’s ability to scale.

“We do see added risk from Uber aiming to take greater share of the fare from drivers and expect that the more Uber pushes here, the more drivers will fight back and protest, increasing the likelihood of regulations (particularly at the state level in the U.S. and in Europe) of minimum wage guarantees,” Wedbush analyst Dan Ives wrote in a note. He added that investors are specifically worried about wage guarantees in major ride-sharing markets such as Los Angeles and San Francisco.

In recent years, drivers have complained of falling wages, with a 2018 J.P. Morgan Chase study finding a 53% decrease in ride-sharing wages between 2013 and 2017.

Local governments are starting to take notice–and action. New York City passed the nation’s first ride-sharing wage requirement in December, imposing a minimum of $ 17.22 per hour after expenses. That same month, a U.K. court upheld a lower-court decision classifying Uber’s drivers as workers, not contractors in a ruling that entitles individuals to a minimum wage and paid holidays (Uber is appealing that ruling).

If more lawmakers do take aim, it will be painful for the ridesharing giants. According to Uber’s IPO filing, reclassifying its drivers as employees “would require us to fundamentally change our business model, and consequently have an adverse effect on our business and financial condition.”

Political Pressure

Adding to the fire: a field of presidential candidates eager to point out the vast inequalities between the people running Uber and the drivers working for them. Several Democratic presidential hopefuls such as Sen. Bernie Sanders (Dem.-Vt.) are running with income inequality as a key part of their platforms.



Uber has offered early drivers IPO bonuses, the chance to invest in the company, and free online tuition to Arizona State University. “Drivers are at the heart of our service─we can’t succeed without them─and thousands of people come into work at Uber every day focused on how to make their experience better, on and off the road,” an Uber spokesperson said in a written statement. “Whether it’s more consistent earnings, stronger insurance protections or fully-funded four-year degrees for drivers or their families, we’ll continue working to improve the experience for and with drivers.”

But for many, it’s not enough. Sam Vance, a 39 year-old full-time driver is eligible for the bonus and IPO buy-in. Living paycheck-to-paycheck and saddled with student loans, Vance’s bonus isn’t expected to last long. He also won’t have enough to buy more than two or three shares of Uber, which is expected to priced in the $ 44 to $ 50 range—hardly enough to make a difference.

“It’s inconsequential either way,” he said.

A Balancing Act For Uber

The big question remains: will the sight of thousands of drivers protesting tomorrow scare away investors?

In New York City on Wednesday, some 10,000 Uber drivers are expected to participate, according to the New York Taxi Workers Alliance. These Uber, Lyft, Via, and Juno drivers are expected to shut down the app between 7 a.m. and 9 a.m., gather at the 59th Street Bridge and Brooklyn Bridge, before making their way to Uber’s headquarters in Long Island City.

Other cities are taking different approaches to the protest. Rideshare Drivers United is calling for its Los Angeles-based cohorts to boycott the app for 24 hours starting at midnight, with picketing around the Airport throughout the day. Gig Workers Rising meanwhile is planning protests in front of Uber’s headquarters in San Francisco.

True, this is a company that’s already dealt with its fair share of controversy. “Right now Uber is doubling down on growth and trying to monetize Uber Freight and Uber Eats,” said Ives. “Profitability continues to be far, far away. They are trying to build themselves into the Amazon of transportation—and investors are willing to give them the benefit of the doubt.” That said, “There is a recognition that it is a balancing act between higher (revenue), and the fact that drivers are the hearts a lungs of the ecosystem,” said Ives. “They need to play nice in the sandbox.”

Mark Cooper

Mark Cooper

Mark Cooper is Political / Stock Market Correspondent. He has been covering Global Stock Markets for more than 6 years.