Uber Losses Trigger $228M Write-Off At PayPal

PayPal lost $228 million in the third quarter partially due to Uber’s failure to make money, Bloomberg reported on Tuesday (Oct. 8).

PayPal’s $500 million investment in Uber just before its initial public offering (IPO) dropped 34 percent. Its investment in Latin American retailer MercadoLibre dropped 10 percent.

In an email to Bloomberg, a PayPal spokeswoman indicated that the company’s quarterly guidance does not incorporate expectations for Uber and MercadoLibre’s stock price performance during the quarter, given the “inherent difficulty” in predicting stock market fluctuations for publicly traded companies. As a result, PayPal said they have elected to update the market after quarter-end to disclose the impact on its earnings. In 2019, including the loss being recognized in the third quarter, the company’s investments have resulted in $0.11 in unrealized gains, PayPal stated.

Uber used PayPal’s Pay With Venmo platform for processing payments. Slow growth and widening losses have negatively affected Uber’s stock.

PayPal President and CEO Dan Schulman said in an April LinkedIn post that along with the $500 million private placement, “since 2013 we have supported Uber’s payments capabilities as their lead payment processing partner in the U.S. and Australia.  Today, I am thrilled to announce that we have reached an agreement to extend our global partnership with Uber and intend to explore future commercial payment collaborations, including the development of Uber’s digital wallet.”

Uber is the second publicly traded ride-hailing company in the U.S., and some analysts have warned that its losses could result in higher fares for customers. Some Wall Street analysts have argued that when companies like Lyft and Uber go public, investors may not be happy if the two continue to lose money, prompting them to raise prices.

The two ridesharing firms have, for years, slashed prices and offered perks to steal market share from taxi companies and each other. Both have seen revenue surges, but both have also seen mounting losses.

“You have shareholders who want you to generate profits,” said Mitchell Green, founder of Lead Edge Capital, an investor in Uber. “There are lots of different levers, and one of them is pricing … These companies have more pricing power than people think.”