Uber is currently raising a big new round of financing that it hopes to close this quarter at a $62.5 billion valuation (at $48.77 per share).
Bloomberg’s Julie Verhage saw a 290-page document prepared by Morgan Stanley for wealthy clients who may be interested in investing at a minimum buy-in of about $250,000.
In the document, Morgan Stanley outlines a bunch of the risks to Uber’s business. They aren’t anything surprising and include uncontrollable market conditions, increased competition, and expensive lawsuits.
Here are some of the ones that standout:
- There’s talk of an Uber IPO, but no promised time frame for it, and Morgan Stanley warns that things like poor market conditions, poor financial performance or a generally weak economy could delay or cancel an IPO altogether. Uber could also get acquired (although at Uber’s current $62.5 billion valuation, the outcome seems unlikely.)
- The battle with Uber drivers over whether they should be considered employees or contractors is a big money-suck for Uber. Many drivers think they should be fully-employed by the company, which would be extremely expensive (Uber currently has about 5,000 employees versus hundreds of thousands of drivers). Companies have to pay Social Security and Medicare taxes for each employee among other things, according to the IRS. They don’t have to do any of that for independent contractors, which saves them a lot of money.
- Increased competition might mean Uber has to burn even more cash. Competitors like Lyft and Didi, particularly abroad, may mean Uber needs to spend even more money to improve brand awareness and onboard new users, and the unprofitable company — while generating billions in annual revenue — is already burning a ton of cash.
We’ve reached out to Uber for comment.
For more of Uber’s risks, head over to Bloomberg to read Morgan Stanley’s language in detail.