Uber UBER shares fell Monday as the ridesharing service lost its operating license in London. The announcement from Transport for London comes as the regulator cited 14,000 instances in late 2018 and early 2019 in which unauthorized drivers were able to use Uber’s software to meet and pick up riders.
The transportation regulator deemed the pattern of Uber’s security failures as a potential safety risk for London commuters and opted to not renew Uber’s license.
London Represents Key Market
London represents a key market that Uber aimed to expand in as it continued its international growth campaign. The ridesharing company reported that it has 3.5 million riders and 45,000 licensed drivers in London.
Uber quickly responded to the regulator’s announcement and stated that the firm plans to appeal the decision. Uber CEO Dara Khosrowshahi stated on his Twitter page that “Over the last 2 years we have fundamentally changed how we operate in London” and that the firm would continue in the appeals process to salvage its London Operations.
Uber will have the opportunity to publicly argue its case in front of a judge. The company will be able to continue its operations in London throughout the appeals process. London is Uber’s biggest European market and it’s a key growth driver outside of the US for the young company. However, Uber has faced increased competition in London from the likes of Estonian start-up Bolt and French rival Kapten.
This isn’t the first time Uber has lost its operating license in the UK capital. In 2017, TfL rejected Uber’s application for a long-term license because of issues including safety and its corporate culture and governance. The regulator pointed to Uber’s use of an app called Greyball, which allows users to evade surveillance by local authorities as one of the reasons for the rejection.
After Uber appealed the decision, a judge overturned TfL’s decision in June 2018 and the company was granted a 15-month license. Uber is the latest tech company to find itself as the subject of regulatory scrutiny as Facebook FB, Amazon AMZN, and Apple AAPL have found themselves under regulatory scrutiny in the US.
Uber CEO Attempts to Ease Worries
Uber has been hit with an onslaught of setbacks, from the scrutiny of its corporate governance under Travis Kalanick’s tenure to the recent regulatory restrictions. The company’s stock has struggled to gain any traction, with shares down over 29% since its May IPO. Shares of Uber currently hover about 14% above their all-time low of $25.58.
Perhaps more importantly, Uber’s lock up period following its IPO ended earlier this month and Kalanick sold about 20% of his stake in Uber shortly after. Kalanick sold 20.3 million shares worth about $547 million that were held in a trust, according to an SEC regulatory filing. Additionally, he sold another $164 million worth of stock between November 11 and November 13.
The founder’s large transactions pushed Uber’s stock to an all-time low as it further exacerbated Wall Street’s doubts about the company. However, in a vote of confidence, Dara Khosrowshahi announced that he bought 250,000 shares at a price of $26.75 per share.
Khosrowshahi has ramped up his efforts to improve Uber’s relationship with regulators and as Wall Street. Uber added a new safety tool to its platform that allows users to flag discrimination experienced on a trip, while another tool will send out push notifications in the event that GPS data indicates a car crash may have taken place.
In addition, the CEO’s insider investment comes a few weeks after Uber set a timeline to become profitable on an adjusted EBITDA basis. Uber forecasts that it can generate positive adjusted EBITDA for full-year 2021, as the company continues to better scale its operations and improve its unit economics.
Uber stock has been battered because of regulatory issues and its staggering losses. However, the ridesharing firm’s CEO has helped steer the firm in right direction as his safety efforts and personal investment in the company have helped quell some investor worries.
With the continued safety developments Uber has orchestrated, the company may be able to once again successfully navigate London’s regulations, which will extend its business’ growth runway.
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