Uber Has Raised Nearly $10 Billion in Four Months. It Needs More.

The ridesharing leader is borrowing $750 million to help fund its purchase of Careem.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It’s now been just over four months since Uber (NYSE: UBER) went public, which was one of the most highly anticipated IPOs of 2019. When companies go public with a traditional IPO, they raise boatloads of capital that ideally should help fund growth going forward.

In Uber’s case, it raised roughly $8 billion in net proceeds from the offering after deducting underwriting discounts and commissions. On top of that, Uber raised another $500 million through a private placement with PayPal that closed just days after the IPO. The ridesharing leader also received another $1 billion from Toyota, Softbank, and Denso in July after a previously announced investment closed.

You might think that raising nearly $10 billion since May would be enough cash to satisfy Uber’s capital needs for a while. You’d be wrong.

Borrowing for Careem

Uber this morning announced a new proposed $750 million senior notes offering that will come due in 2027. The paper will be offered to institutional investors and will not be available to public investors. The company says that it intends to use the proceeds from the offering to fund part of its purchase of Careem, the $3.1 billion acquisition announced in March. Careem is a popular ridesharing platform in the Middle East and North Africa (MENA).

The purchase will be funded with $1.7 billion in convertible notes and $1.4 billion in cash. Raising $750 million in senior notes to fund the cash portion of that transaction will effectively mean Uber is funding a greater proportion of the acquisition with debt, even though Uber finished the second quarter with $13.7 billion in cash and cash equivalents (including restricted cash).

Note that the $1 billion raised from Toyota, Softbank, and Denso wasn’t received until after the close of the second quarter.

Feel the burn

Uber’s core business famously burns cash at astounding rates: Operating cash flow in the first half of 2019 was negative $1.6 billion. In an effort to cut costs, Uber announced earlier this week that it would be laying off 435 employees within its product and engineering divisions, representing around 8% of its global workforce. That was actually the second round of layoffs this year — Uber had laid off 400 workers on its marketing team in July.

Another significant development from this week that has massive implications on Uber’s cost structure and cash burn rate was that the California Senate passed a new law that would require many gig-economy tech platforms to classify workers as employees. That would make Uber drivers entitled to various benefits like health insurance and overtime pay, among others.

The bill, known as Assembly Bill 5, is headed to Governor Gavin Newsom’s desk to sign, and Newsom has signaled his support for the legislation. Uber Chief Legal Officer Tony West has already made the flimsy argument that its independent contractor drivers are not core to its business, which has already prompted at least one proposed class action lawsuit.

Uber’s going to need all the money it can get.

Should you invest $1,000 in Pembina Pipeline right now?

Before you buy stock in Pembina Pipeline, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Pembina Pipeline wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,750.10!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/22/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool has the following options: short October 2019 $97 calls on PayPal Holdings. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Tech Stocks

Tech Stocks

Top Canadian Stocks to Buy for Growth in 2025

There are a lot of growth stocks you can buy and hold for the long term to build a sizable…

Read more »

hand stacking money coins
Tech Stocks

Billionaires Are Selling Tesla Stock and Betting on This TSX Stock

Tesla stock has long been the one to beat, but after falling in share price, stability may be more key.

Read more »

chart reflected in eyeglass lenses
Tech Stocks

OpenText Stock: Down 27%, Buy Now for Pure Long-Term Perfection

OpenText stock may have dropped after earnings, but according to its CEO, future growth is just getting started.

Read more »

ETF chart stocks
Dividend Stocks

These ETFs Are My 2 Favourites to Buy for 2025

These two top ETFs may be going through some volatility right now, but both are due for huge returns in…

Read more »

A person uses and AI chat bot
Tech Stocks

Missed Out on Nvidia? My Favourite AI Stock to Buy and Hold

Its high growth potential, resilience to the emergence of low-cost LLMs, and low valuation make it a compelling stock in…

Read more »

Abstract Human Skull representing AI
Tech Stocks

1 Top Tech Stock to Invest in Canadian AI Stocks for Long-Term Gains

While many AI companies attract attention for high but speculative growth, this reliable AI stock is worth a look by…

Read more »

e-commerce shopping getting a package
Tech Stocks

Why Shopify (TSX:SHOP) Could Be the Hottest TSX Stock in 2025

Shopify (TSX:SHOP) might have enough steam to push the TSX higher and higher in 2025.

Read more »

online shopping
Tech Stocks

Down 22% From All-Time Highs, Is Shopify Stock a Good Buy in 2025?

Shopify stock has delivered market-beating returns to shareholders since its IPO in 2015. Is the TSX tech stock still a…

Read more »