Looking for easy-to-understand reasons for the stock prices of Uber (UBER), Lyft (LYFT) and Slack (WORK) sucking wind since their super hyped initial public offerings earlier this year? Tech titan and former long-time Cisco CEO John Chambers has two reasons.
“Well, I think sometimes they waited too long to go public, that’s part of the regulatory issue we face and shareholder activism, which I think has to change,” Chambers said on Yahoo Finance’s The First Trade when asked what the three companies have done wrong .
Chambers explained as public companies, the errors for some of those top names and one-time unicorns have persisted.
“When you go public, you have got to have a very clear path to how you are going to make money and free cash flow. I think so many of these companies have gone in not only without a clear path, but not an understanding at all about they are going to make it happen,” Chambers added.
It could be time for Uber, Lyft and Slack to pursue the now VC investor Chambers for their boards. Because clearly, all three of them are just not getting life as a public company.
Shares of Uber, Lyft and Slack all plumbed fresh lows this week as Wall Street continued to question the business models of each.
The meltdowns in Uber and Lyft have gained steam after they delivered more big losses for the second quarter.
Uber badly whiffed on analysts' top and bottom line estimates for the quarter, and reported a massive $5 billion loss. Misses were also notched in Uber’s closely watched gross bookings and adjusted revenue figures.
“The quarter was a gut punch to the bulls — Uber failed to give investors a path to profitability,” Wedbush analyst Dan Ives told Yahoo Finance.
As for Lyft, it spun a more positive story on its second quarter earnings call amid reduced price competition in the ride-hailing industry.
Still, Lyft lost a staggering $644.2 million in the second quarter.
Investors have chosen to focus on the losses for each instead of the promise for brighter days. Recent concerns about new regulation in California whereby Uber and Lyft drivers could be classified as employees have also hammered investor sentiment. If drivers are seen as employees, it could raise the cost of doing business for Uber and Lyft at a time where their businesses are already losing large sums of money.
Meanwhile over at Slack, it said Wednesday evening it lost $359 million in the second quarter despite a 58% revenue increase. Slack co-founder Stewart Butterfield didn’t sound too concerned about the lack of profits on a conference call with analysts.
But judging by the market reaction, perhaps Butterfield should give a damn about the bottom line.
Let these sell-offs be a reminder to investors: profits matter more than hype and not every unicorn is the next Amazon or Netflix despite what smoke the investment banks blow in your face.