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Uber Surges After Saying Cash Cushion at Least $4 Billion

Eric Newcomer and Candy Cheng

(Bloomberg) -- Uber Technologies Inc. told investors that it would have billions of dollars in cash at the end of the year, even in its bleakest estimates about the business’s prospects.

Uber’s shares soared 38% in New York, the most since the company listed last year.

During an analyst call Thursday, Uber said it expects to have $6 billion in cash on hand, along with with a $2 billion debt revolver, at the end of the year. In the worst-case scenario presented, with the new coronavirus causing a more extreme slowdown in the ride-hailing business, the company would have $4 billion in cash reserves plus the revolver, Uber Chief Executive Officer Dara Khosrowshahi said.

In an interview with Bloomberg TV on Thursday, Khosrowshahi reiterated that he believed Uber was well positioned to weather the crisis. He also said that Uber was trying to do its part to “bend the curve,” a phrase that’s become shorthand for managing the spike in Covid-19 cases so that hospitals don’t get overwhelmed. The executive, based in San Francisco where residents have been advised to shelter in place, said that while the order was in effect “I wouldn’t put my kids in an Uber because the governor has specifically asked us to lock down.”

The company’s projections about its cash position were meant to reassure investors that Uber’s business could withstand the economic shock caused by global social distancing measures. The pandemic is keeping people in their homes as they attempt to slow the spread of the virus, devastating the ride-hailing business.

Khosrowshahi said that Hong Kong, which experienced the coronavirus ahead of the U.S. and Europe, saw trips fall 45% and that the city is now 30% off of its peak. Still Khosrowshahi acknowledged, “every city is going to be different.”

Uber has said it would turn a profit this year, a goal that Khosrowshahi said the company was still aiming for. “We’re certainly targeting it,” he said in the Bloomberg TV interview. But he added, “I’m much more focused on tomorrow and next week.”

Khosrowshahi also said that when the crisis abates, the company would consider making acquisitions. “We’ve got a great opportunity to be a consolidator,” he said.

In an email to staff on Wednesday, Khosrowshahi also sought to reassure employees about the company’s prospects. “We are on incredibly solid financial footing,” he wrote in the email, obtained by Bloomberg. “We are asset-light and the majority of our costs are variable.” He urged staffers to take the plight of drivers seriously, writing, “We owe it to the millions of earners who use Uber to be there for them as much as possible.”

Uber’s stock has fallen faster than the rest of the market. The company’s value was $35 billion on Thursday. Uber’s market capitalization in its initial public offering almost a year ago was more than twice that, at $75.5 billion. But in the email on Wednesday, Khosrowshahi celebrated the company’s decision to go public. “Even though it was choppy, we raised a huge amount of capital,” he wrote, calling it “an incredibly important move.”

Uber had $10 billion of unrestricted cash as of the end of February, the company said. Of that, $1.5 billion is committed to acquisitions that have already been signed. Khosrowshahi also told investors that the company didn’t have “significant financial covenants” that could endanger the company’s cash position.

“We just thought it was important to update you quickly in such a dynamic situation,” Khosrowshahi said.

(Updates starting in the second paragraph.)

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