Uber Agrees To Buy Food-Delivery Service Postmates for $2.65 Billion in Stock

Uber has bought food-delivery service Postmates for $2.65 billion in stock, the companies announced Monday. From a report: The deal brings together the fourth-largest U.S. food delivery service with Uber Eats, which trails only DoorDash in market share, according to Second Measure and Edison Trends. The companies said Uber intends to keep the Postmates app running separately, "supported by a more efficient, combined merchant and delivery network." Uber previously was in the running to buy rival food delivery service GrubHub, but talks broke down as the companies could not agree on a break-up fee, and the ride-sharing company grew frustrated with what it perceived as stalling tactics, CNBC previously reported. GrubHub instead sold to European food delivery service JustEatTakeaway in early June. Uber is banking on food delivery to help sustain its business during the coronavirus pandemic, as demand for ride-sharing has plunged. In its first-quarter earnings call, Uber said gross bookings revenue for its rides segment was down 80% in April from a year earlier, while gross bookings revenue in eats was up more than 50% during the period.

What expenses does Uber have?

[Way Smarter Than You]

I understand that Uber loses money by subsidizing rides to kill the taxi industry.

But if rides are way down how are they still losing so much money??

If not on ride subsidy then what? Sounds like a ton of bloat to lose billions by not actually doing anything.

Re: What expenses does Uber have?

[tiananmen tank man]

You must have forgotten Uber is trying to create a driverless car. That's not cheap

Re: What expenses does Uber have?

[Way Smarter Than You]

Oh, yes, I did forget that. Thanks!

Re:

[cusco]

They also have a big fine to pay for buying Waymo's stolen technology.

Money loss

[fluffernutter]

Never have I seen a company fight so hard to lose money. Obviously some are getting very rich off of total ineptitude.

This is market consolidation

[rsilvergun]

of the sort that takes place during an economic downturn. There is still demand for food delivery services. If Uber can buy up the larger competition they can then squeeze out the smaller competition with monopolistic business practices. Then they can jack up prices until their profitable.

As for their losses, those get turned into long term tax write offs. Decades from now Uber will be paying $0 in taxes on profits made thanks to losses incurred now. Our tax code subsidizes all this.

Sure wish I coul

Re:

[fluffernutter]

Too bad you need money to do this in the first place, or everyone would.

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[fluffernutter]

They wouldn't still be planning on self driving happening would they??

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[alvinrod]

That strategy doesn't work because people don't need food deliveries. If they try to jack up the costs they'll just lose business. Further, raising prices just leaves room for new businesses to come in and eat their lunch. About the only area you see this strategy work at all is the pharmaceutical industry where people need the product and the government limits competition through strict and expensive regulatory controls and patent enforcement.

Also there are limits about how long past losses can be writt

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[CWCheese]

I've given up on food delivery services, and many of the restaurants I patronize have begun to minimize or eliminate them too. One very good Italian eatery near my home had been building his own delivery with a pair of Prius vehicles a couple years ago. During the lockdown I discovered he had jettisoned the Doordash/Grubhub/Chownow/Postmates and acquired a fleet of 6 vehicles that now include Ford Transit Connect vans. He redeployed much of his service staff to drive delivery and increased his pick-up busin

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[q_e_t]

raising prices just leaves room for new businesses to come in and eat their lunch.

applause

Re: This is market consolidation

[Way Smarter Than You]

Your low wage job isn't a loss. However, if you invest in the market and lose money you can take a few K off your taxes for a few years. It's a tax reduction, not a credit. Have you been investing? Over the long term the best path to retirement for the typical worker is to max out your 401k every year. Even with the crashes we have had the overall long term is up, historically.

Re:Money loss

[alvinrod]

Maybe they've realized that if their losses are great enough they'll cause an underflow and become insanely wealthy. I'm betting one of their directors played Civilization and went up against Gandhi in a few of their games.

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[bugmenot151]

Maybe they've realized that if their losses are great enough they'll cause an underflow and become insanely wealthy. I'm betting one of their directors played Civilization and went up against Gandhi in a few of their games.

I really wish I had mod points right now XD, I love this comment ^^^

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[k6mfw]

Seems to me Uber is able to get investors to invest into their plans with possible (and highly unlikely) chance of recovering investment with a nice profit margin. I don't know much of this, on a local level I've seen small real estate projects get a little cash ($100K) from acquaintances that have some extra cash and figured it is worth while rather than letting it sit in a bank. However, there are some Uber executives doing quite well (they live in really nice places and get to jet around the world). For

Bad deal

[samwichse]

Postmates just received a bunch of shares of garbage level stock in exchange for their company.

Stock in a company that hasn't been profitable, has no plan on how to become profitable, and is easily replaced. Uber is a dead company walking.

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[DarkVader]

The bizarre thing is that Uber could have been VERY profitable by now if they hadn't gone nuts with price cutting.

They offered a service that was demonstrably superior to taxi service in most cities*. All they had to do was maintain an app and do a little bit of advertising. They could have been raking in the cash.

*Yes, I know NYC and London have good taxi service. In my town, if you called a taxi before Uber at best you'd be waiting a while, at worst they wouldn't show up at all.

JACKPOT!! Just like in Las Vegas...

[NoNonAlphaCharsHere]

Tip the dealer and WALK AWAY!!!

The fact that $2.6 billion in Uber stock even EXISTS is ridiculous. Sell it while it's worth the paper it's printed on and retire or invest it in something that has some intrinsic value. Even $2.6 billion in Q-Tips has more long-term value than Uber stock.

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[account_deleted]

Comment removed based on user account deletion

Re: what are they thinking?

[yassa2020]

in 2020 there are zero delivery service providers that are actually turning a consistent profit.

On paper they are losing money, by using accounting techniques that makes even Hollywood look like amateurs. The fact is, the median delivery charges about $30 while paying $1.50 to the laborer doing it. Multiply this by 100 deliveries per restaurant per day times 500 restaurants per city times 1000s of cities and they should be making many millions profit per day.

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[cusco]

Actually Amazon's delivery drivers and contractors are doing pretty well. So well that they need more, and are willing to help subsidize your startup costs and give deep discounts on vehicles.

Pyramid Scheme...

[george14215]

...for VC's