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Uber — Risky business to invest in?

POSTED BY Nigel Andretti ON 26 September 2016

By Y S CHAN

IN April 2005, Accel Partners paid US$12.7 million (RM52.41 million) for a 15 percent 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 had grown 4,340 times to more than US$55 billion.

In 2011, Uber was valued at U$60 million and speculative investing has seen this figure grow to more than 70 billion, an impressive 1,166 times more than five years ago.

Malaysia’s Retirement Fund Incorporated (KWAP) recently invested US$30 million in Uber, which is equivalent to 0.04 percent of US$70 billion.

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

After the 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% windfall or loss. It is more likely to be the latter as Uber has not won many friends, especially among the 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 has no respect for local authorities and ruthlessly tries to sideline taxi drivers and their dependents.

It makes use of gullible 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 appears to have little concern for 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 insists that governments dump existing regulations covering hire transportation.

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

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

When Uber was valued at US$60 million in 2011 and KWAP invested US$30 million, 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 probably had good reasons to stay out of Uber Technologies Inc.

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