Uber Buys Postmates

A modest number of Vestact clients own Uber shares in New York portfolios. I have liked the prospects for the company for many years, and got very excited when they listed on the New York Stock Exchange in May 2019. I rounded up a few risk tolerant customers and we were ready with our money on listing day. The opening price on day one when we jumped in was $42 per share.

Since then, the stock price performance of Uber has stunk, which is embarrassing. Initially the problem was insider selling. By February 2020 that had run its course and the shares were back at $41, so we were close to breakeven. But Covid-19 was a disaster for ride-sharing companies, because of the lockdowns. Yeah, of course, we all had to stay at home! The stock price fell by half to $21.

Since hard lockdowns ended, ride traffic has picked up a bit because people who can afford to do so would rather use an Uber than take the bus, or crowd into an underground train.

Restaurants were closed for eat-in meals but open for takeaway, so in recent months food delivery has taken off, which is good. Uber Eats has been growing in leaps and bounds.

Today's news is that Uber is acquiring delivery-app operator Postmates, for $2.65 billion in an all-stock takeover. That will help Uber to gain ground against privately-held DoorDash, which is the current market leader in US food delivery. Postmates has a strong market share in Los Angeles and the American Southwest.

The move for Postmates comes on the heels of Uber's failed bid to acquire publicly traded GrubHub, which was scooped up by Europe's Just Eat Takeaway.com for $7.3 billion a few weeks back. With fewer players in the market, margins should improve. Uber's share price is up nicely today, to $32.50. Current shareholders should hang in there.

Here is some more detail on this deal from tech website ArsTechnica: Uber plans to gobble up delivery rival Postmates in $2.6 billion deal.