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How Much Damage Will Departure of Top Executives Cause for Uber Stock?

Brad Moon

Uber (NYSE:UBER) investors had some big news to digest on Friday, as the company announced a shakeup in its leadership ranks. In an e-mail to employees, it was announced that the company’s chief operating officer and chief marketing officer are departing.

How Much Damage Will Departure of Top Executives Cause for Uber Stock?

Source: Uber

The latest troubling Uber news was quickly felt on the market. The company’s stock dropped to close at $44.16 — that’s below the $45 Uber IPO price, which had finally been reached and then topped just two days before. Uber stock continued on a downward trend in pre-market trading.

Uber Stock Down as Two Senior Executives Depart

On Friday, Uber employees received an e-mail from company CEO Dara Khosrowshahi. In it, he announced that COO Barney Harford and CMO Rebecca Messina are out. After several years of being focused on preparing for the Uber IPO, Khosrowshahi will now be taking a more active role in managing the company’s core businesses. Bloomberg published portions of Khosrowshahi’s e-mail:

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“Over the years, I’ve learned that at every critical milestone, it’s important to step back and think about how best to organize for the future. Given that we’re a month past the IPO, now is one of those times. I now have the ability to be even more involved in the day-to-day operations of our biggest businesses, the core platform of Rides and Eats, and have decided they should report directly to me.”

The market reaction probably wasn’t what the company was hoping for. Uber stock ended up dropping 1.69% to close at $44.16, once again slipping below the $45 Uber IPO price. 

Trouble in the Executive Ranks a Frequent Theme in Uber News

When it comes to Uber news, it seems there is seldom anything to celebrate. Last year, the company had the ignominious distinction of being the first to record a self-driving car fatality when an Uber test vehicle killed a pedestrian in Arizona. The company has been under fire for being ground zero in a “gig economy” that’s seen as exploiting workers. That has brought a flood of negative publicity and legislation that has forced Uber and competitor LYFT (NASDAQ:LYFT) to pay drivers a minimum hourly rate — at least in New York City. On May there was also a strike by Uber drivers making national headlines.

None of this has been good news for Uber stock, and helped set the stage for an Uber IPO that fizzled.

However, in addition to factors outside of the company’s headquarters, controversy in its executive ranks has been another Uber news constant. The big one of course was the 2017 ousting of founder and CEO Travis Kalanick. He was replaced by Dara Khosrowshahi. Also in 2017, Uber’s SVP of engineering was forced to resign after he failed to disclose leaving his previous employer —Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google — after sexual harassment accusations. In fact, there was a parade of executive departures in 2017.

Turning back to the latest shakeup, COO Harford was previously under investigation for making racially insensitive comments. Given the ongoing controversy around him, and the need to ramp up Uber’s performance, this departure is hardly a surprise. CMO Messina spent just nine months with the company, but CEO Khosrowshahi warned in his e-mail to staff that Uber’s “brand continues to be challenged.” Clearly, he wasn’t confident that his Chief Marketing Officer was up to the task of building up excitement about the company after the disappointing Uber IPO, the controversies, the threat of government regulation and the driver unrest.

Will Uber stock ever live up to expectations? A renewed focus on marketing and a big move to more direct CEO involvement in day-to-day operations shows the company is determined to try. 

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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