A Deep Dive Into Uber CEO Dara Khosrowshahi's Stock Selling Strategy

Top lines at both companies have been steadily expanding, while profits have generally stabilized at $250 million per quarter, reflecting Silicon Valley ethos: focus on growth first before worrying about profits later.

Both companies have amassed substantial cash hoards through all of their funding rounds and debt issuances, as well as anticipated IPO proceeds. Their investor bases include major financial and strategic investors such as Fidelity, CapitalIG, and Saudi Arabia Investment Fund.

Investors

Uber's technology is certainly revolutionary, but what truly sets it apart is their determination: sticking to its brand strategy of being an industry disruptor even if that means clashing with regulators or local authorities; expanding across the globe no matter the cost; and correcting their mistakes once identified.

Investors remain hopeful for Uber's future despite recent setbacks at the company, due to its aggressive expansion playbook which saw them grow from $3 million to $41.2 billion within 15 months. The strategy involves secretly entering new markets while hiring staff locally before quickly launching services quickly while exploiting any legal loopholes to promote promotions - all tactics which helped Uber increase from its original value of $3 million to over $40 billion within that same timeframe.

Investors who participated in Uber's initial public offering made a fortune from its rapid stock rise. Since then, however, its share prices have taken a significant hit as Uber burns through $2.5 billion of negative cash flow each year. While Uber's current profitability goals may point in the right direction over time, investors will likely need patience before seeing any significant results from them.

Early investors and employees of Uber can now sell their shares following the end of its lockup period, with Travis Kalanick as its cofounder and former CEO being the biggest seller, having sold 53 million shares this month alone - representing approximately 55% of his stake in the ride-hailing service.

Recent weeks saw Uber board members and executives sell off a significant percentage of their positions in the company, including Dara Khosrowshahi as CEO and Barney Harford as COO. Both executives possess experience growing share values at travel booking companies which will aid in their ability to navigate any challenges Uber encounters on its quest for global transportation supremacy.

As the market has shown us, a company's CEO isn't as important as its underlying business. While it may be disappointing that Kalanick decided to sell his shares so quickly, his move won't significantly alter growth prospects; so it would be wise to watch its financial performance over the coming year.

Analysts

Uber remains one of the world's most overvalued companies despite its remarkable success as an on-demand transportation service, with an initial public offering value estimated at $68.5 billion; after SoftBank acquired part of it this fall, however, that figure dropped significantly to around $48 billion.

As a result, investors have become alarmed at Uber's declining share price and taken steps to reduce their exposure. But these market fluctuations have not altered Uber's long-term potential as it continues to expand its ridesharing business while expanding into new areas such as food delivery and flying taxis.

Analysts will closely watch signs that the new CEO is taking steps to alter the culture of his company. He has already begun referring to drivers as "driver-partners," visiting cities and speaking to drivers directly about their experience with Uber. Furthermore, he acknowledges that executives may lose touch with reality, and hopes to alter how they communicate with regulators.

Analysts also consider a company's profitability when making their assessment. Although Uber has experienced rapid expansion and immense success since its founding, it still isn't profitable and could never become so. Khosrowshahi must address this issue and bring Uber public as quickly as possible.

The greatest obstacle facing the company is getting past government resistance to private companies hiring drivers to transport passengers in their own cars. But its new CEO remains confident that he can overcome this hurdle by emphasizing creating an exceptional product experience and forging partnerships with other transportation firms.

While the CEO shakeup may be detrimental to Uber, it will allow its new leader to separate himself from its founder and lessen any influence from his personal brand. Analysts will find it easier to assess Uber's true potential.

Shareholders

Travis Kalanick, one of Uber's founding investors and former CEO, sold nearly one-third of his shares this week for $1.4 billion according to a news report released Thursday, taking his total sales since its IPO lockup period expired early November to nearly $2 billion.

The former executive's sell-off comes after an embarrassing year for Uber, including sexual harassment and toxic workplace culture allegations, and covering up of a massive data breach that compromised personal information of 57 million passengers and drivers. Furthermore, regulatory challenges were presented from various countries around the globe as well as litigation from Google alleging technology trickery designed to circumvent regulators.

Dara Khosrowshahi, Uber's Board Chair and New CEO has purchased shares to increase share value over the last two weeks. Khosrowshahi previously headed up travel booking giant Expedia so he has experience increasing share values at public companies.

However, due to Uber's stock declining so significantly so far this year, shareholders may not see much return in their investment in the near future if Uber cannot generate profits - prompting many to ask why bother investing?

Investors may also be concerned with the tax burden that could accompany owning shares in a public company, given its 35% U.S. corporate tax rate - one of the highest worldwide.

Uber may be able to stave off the tax hit with its planned switch to a "profit-sharing" plan where employees receive part of the company's profits; even if that proves successful, however, any such change could still come under scrutiny from federal and state tax agencies.

At present, some investors aren't ready to give the company another chance until it can improve its reputation and profitability. That can only hurt both shareholders and management of the firm since rival companies pose stiff competition and scandals have damaged its image further.

Market Forces

The company's new CEO, Dara Khosrowshahi, has made it clear that he plans to change Uber's culture and may conduct an IPO in 18 to 36 months. That's the kind of timeframe that venture capital-backed companies often set for an IPO, and it would be the latest step in a series of big business changes at Uber. But while the stock market usually responds positively to a promise of an IPO, there are downsides, as one California man discovered.

The stock was soaring when he stepped down, but it's since plunged more than 30 percent and trades at less than half its IPO price of $45 per share. Investors can still make significant profits if they are patient and hold on.

Despite its recent challenges, Uber remains a remarkable company. It has achieved global scale with ridesharing and is now expanding into adjacent business ventures, such as food delivery and last-mile freight. Those big-picture business plans are what investors value in tech stocks, and they can be the reason to buy a share.

But a series of embarrassing incidents, including sexual misconduct claims and regulatory battles, has tarnished the company's reputation. The stock has been underperforming, and some shareholders are concerned that it could continue to decline.

Investors also worry that the company will struggle to attract drivers, and that could affect its profitability. To help address these concerns, Khosrowshahi has promised to make the company more friendly to workers. He also has vowed to fix Uber's surge pricing system, which sometimes doubled rates during a snowstorm or on New Year's Eve.

Khosrowshahi, who was the head of travel-booking site Expedia, has a strong track record at increasing share values at public companies. And he has hired COO Barney Harford, who is an experienced executive at tech companies, to help him lead the company. That should help to restore confidence in the company. In addition, the SoftBank deal will bring stability to management and reduce the influence of Kalanick on early investors and staff members. Investors can expect more gains from the stock if it recovers from its recent slump.