As a value investor or Warren Buffett follower would put it, they are very capital intensive. This can turn into a bad sign if they can't build a moat (monopoly of sorts) or take a hit on their margins.

What I can even begin to imagine is why are they that much capital intensive?

Uber's actual product is a SaaS. Everything else is contracted. Where is that much money going?

The fact they're losing money like this doesn't really mean anything because Uber isn't a normal business. It's not some little mom & pop outfit that has bills to pay. This is a company whose investors (e.g. the Saudis) have so much cash a billion here and a billion there barely matters.

It's a place for absurdly wealthy people to park vast sums of cash on the bet that Uber will continue to gobble up marketshare from taxi companies, etc., until they're in a position to disrupt transit in general (and ride sharing services, too) with self-driving cars and who knows what else they'll come up with.

I don't think comparisons with Twitter are all that apt. People need to go from point A to B. No one needs to tweet. The network effect of social networks is valuable but I think that value pales in comparison to transportation. The way we pay backs up this premise: we pay for Twitter and Facebook with our eyeballs and our data, but we pay for Uber with our credit cards.

> The fact they're losing money like this doesn't really mean anything because Uber isn't a normal business.

Yeah, Uber is different because of its insane amount of investor money but losing money is still losing money; it can't go on forever. So saying it doesn't mean anything is a bit shortsighted in my opinion.

> It's a place for absurdly wealthy people to park vast sums of cash on the bet that Uber will continue to gobble up marketshare from taxi companies, etc., until they're in a position to disrupt transit in general (and ride sharing services, too) with self-driving cars and who knows what else they'll come up with.

Seems like an extremely risky bet to me. I'm unconvinced they'll be able to make any decent amounts of money in this service especially considering the majority of auto manufacturers are working on similar capabilities; they'll be able to drive the price down far below Uber ever could unless they start manufacturing their own vehicles.

With respect to the second point about hugely wealthy foreign investors parking cash in Uber-like companies, consider that the risk profile of a highly visible company like Uber with very high-volume cash flow, unprofitable though they may be, can often be much lower than the risk profile of keeping the money in the source nation's domestic vehicles. See also: foreign money parked in absurd condos in NYC.

> until they're in a position to disrupt transit in general (and ride sharing services, too) with self-driving cars and who knows what else they'll come up with.

Considering they have a lawsuit against their self driving program [1], I wouldn't put so much faith on that

[1]: https://www.theguardian.com/technology/2017/may/30/uber-fire...

s/park/burn/

People were saying the same thing about Twitter forever and turned out to be largely wrong. I have a feeling the company making billions of dollars in revenue has some smart people who figured out how not to mess this up.

But who knows maybe Uber will stop being the dominate taxi / self-driving car company globally over the next decade and mess it all up. Or not... but I doubt this large expenditure was done without foresight. The question is whether they can dominate for years to come in a high-growth industry, which it seems likely given the wide gap between them and the competition.

> People were saying the same thing about Twitter forever and turned out to be largely wrong.

Twitter lost 456 million dollars in 2016 [1] and I don't remember them ever being profitable so i don't know how those people are wrong.

[1]: https://en.wikipedia.org/wiki/Twitter

If you look, their losses are because of stock-based comp, not because of spending. It's generally a GAAP loss, not a cash loss.

That doesn't make it less real. The company is giving away shares and investors are diluted. That may be a good deal if the stock is overvalued, but probably investors do not share that view.

It still means that their owners won't see any of the money generated by the company. Before compensation, most companies are profitable. And in the end it doesn't matter to the shareholder if you pay stock compensation or cash.

Not true. Stock compensation is dilutitive to existing shareholders putting future pressure on earnings per share and generally means you'll see a share buyback further reducing cash on balance sheet or increasing debt. Further, large blocks of lockup expirations cause selling pressure. Once talent sells stock compensation how do you then retain them? Do you grant more shares diluting existing shareholders further?

It is different for incentives but not for the actual outcome. Obviously you'd have to compare the same compensation levels, i.e. 100k in cash vs 100k in stocks (at payout).

For start ups it can turn out cheaper as the compensation will be lower in stocks if the company doesn't perform well. From a shareholder perspective it's compensation and shouldn't be treated differently. Excluding it from costs is dangerous as it gives the impression that it's optional costs when in reality, you need to pay the stock compensation to retain talent.

Um, Twitter is still not making a profit and their 2017 business plan seems to consist primarily of layoffs.

To be fair, they have like 4,000 employees. I don't understand how they need that many employees for a product that hasn't changed much since IPO

Are we talking about the same twitter? My understanding is they are not doing some well currently. Just because the doors are open for business doesn't mean said business is thriving.

Also, twitter is a platform that has exclusivity. Uber is easily replaceable with Lyft or a taxi service's app. Just because a friend is using Uber doesn't mean I have to. The same doesn't apply to twitter, the platform is the value. This is what kept and keeps twitter afloat, Uber on the other hand paved the way for a shift in the way we consume cars as a service.

Are you sure they were wrong about twitter? It still loses money. I am not saying that twitter isn't valuable, it just may have been overvalued. You certainly lost money if you bought stock in it five years ago.

>I have a feeling the company making billions of dollars in revenue has some smart people who figured out how not to mess this up.

see: enron