Uber IPO: Here’s Why Investors Should Avoid This Stock

Uber IPODespite making history as the highest-valued startup of all time, everything isn’t smooth sailing for Uber Technologies, Inc. The company hit stormy seas in recent months, getting on the wrong side of the French government and the taxi lobby. Those are some powerful enemies to make even before an Uber IPO.

Back in June, taxi drivers across France took to the street in protest of Uber’s low-cost UberPOP service. They protestors ultimately devolved into an unruly mob, overturning cars and harassing passengers that have no direct impact on Uber’s strategic policy.

The company was relatively unfazed by the animosity, having experienced its fair share of pushback from entrenched interests. However, the taxi industry in France is politically powerful and authorities were able to browbeat Uber into submission.

The issue adds to a growing list of hurdles Uber must cross before launching its initial public offering.

French Resistance Could Hinder Uber IPO

The French are at it again. I have nothing against our baguette-carrying friends from across the pond; quite the contrary in fact. Their culture and values are a cornerstone of Western civilization, but the witch hunt against Uber is nonsensical.

France has been at war with Uber for several years now, taking ever more drastic steps to stonewall the ride-share app. The first attack was a rule requiring Uber drivers to wait 15 minutes before picking up a passenger. Needless to say, the courts struck that one down. (Source: The Wall Street Journal, June 30, 2015.)

What followed the initial attack was, and I’m not exaggerating this, a full-blown assault on Uber. Lawmakers passed a bill in late 2014 barring non-taxi apps from showing available cars on a live map. Why?

Well, being able to see how rideshare vehicles are near you is a plus point for Uber, something that customers appreciate and enjoy. But little advancements like that raise the baseline expectations of an industry and threaten the market power of incumbents.

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The powerful taxi lobby doesn’t exactly thrive on change, so they convinced legislators to add anti-Uber provisions to a transportation bill to calm the powerful taxi lobby.

The monopoly power of the taxi industry rests on maintaining the status quo, but that’s a raw deal for consumers. Why shouldn’t they benefit from lower prices and better service? Because taxi drivers want to hold onto a defunct business model? No, that’s simply not good enough.

In any case, the taxi lobby had enough political clout to have two Uber executives indicted for violating French transportation law. Specifically, the new law prohibits a company from connecting passengers to drivers without a commercial license. (Source: The Wall Street Journal, September 15, 2015.)

Unfortunately, that’s pretty well the entire model of UberPOP.

When Can We Expect the Uber IPO?

In March of 2015, Paris police raided Uber’s French headquarters for evidence in the upcoming trials. They have reportedly fined 202 UberPOP drives and the French Interior Minister asked police to graduate from fines to impounding cars.

It’s a tough operating environment and I can’t imagine CEO Travis Kalanick will decide this is the opportune moment for the long awaited Uber IPO.

The smarter decision is to wait for the fog of uncertainty to lift, granting some clarity for the company’s future. In the meantime, Uber has a $51.0 billion valuation on which to depend.

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