Right time to invest in Uber?

Right time to invest in Uber?

A US$30m investment for just a fraction of the global ride-sharing internet company, may not prove a wise decision this late in the game.

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By YS Chan

In April 2005, Accel Partners paid US$12.7 million for a 15 per cent stake in Facebook. By 2012, the start-up was valued at US$83.5 billion, and US$367.5 billion as on Sept 23 this year.

In a span of 11 years, the US$12.7 million investment in Facebook had grown 4,340 times to more than US$55 billion.

In 2011, Uber was valued at U$60 million and speculative investors are pushing it past the US$70 billion valuation currently, which will make it 1,166 times more than five years ago.

Malaysia’s Retirement Fund Incorporated (KWAP) last week announced that it had invested US$30 million in Uber, which is equivalent to 0.04 per cent of US$70 billion.

Even an investment of US$300 million would constitute less than half a percent of Uber’s valuation today.

After any initial public offering, the market capitalisation of Uber Technologies Inc may hit US$105 billion or drop to US$35 billion.

As such, KWAP is in for a 50 per cent windfall or 50 per cent loss. It is more likely to be the latter as Uber has not won many friends, especially among regulators.

The service offered by this transportation network company has been banned in many cities in the United States and countries around the world.

It seems to have no respect for local authorities and has been ruthless against taxi drivers and their dependents.

It made use of private car drivers who risk having their vehicles impounded by enforcement officers or damaged by irate taxi drivers.

It is bent on capturing market share by offering rates lower than regulated fares. It has never been profitable and least concerned with the US$1.2 billion losses for the first half of this year.

Instead of proposing solutions on how ride-hailing services can operate alongside traditional taxi services harmoniously, it has insisted that governments dump existing regulations instead of amending them.

It must be remembered that the technology used by transportation network companies is not exclusive.

Our homegrown Grab is giving Uber a run for its money in Southeast Asia. Uber has recently exited China by selling its operations to a local rival Didi Chuxing. In India, Uber is playing second fiddle to Ola.

If KWAP had invested US$30 million in the company when Uber was valued at US$60 million in 2011, then it would have gone down in Malaysian history as the greatest investment decision.

But no one can be sure for a late investor. The Employees Provident Fund (EPF) probably had good reasons to stay out of Uber Technologies Inc.

YS Chan is an FMT reader.

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