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It has been a little over a month since Lyft’s trading debut, which after a strong start quickly struggled and continues to decline. Now Uber looks to avoid the same fate is it prepares for its upcoming debut.
Uber recently announced an initial valuation of between $80 and $91 billion dollars, a number that towers over Lyft’s $24 billion, but which some suggest could be an undervaluation. This apparent undervaluation may be Uber’s attempt to avoid the slide that Lyft’s stock saw after its debut. Yet, Uber still faces some of the same pitfalls, as it, like Lyft, is still unprofitable.
However, both companies may have a boon coming their way. On April 29, 2019 the US Labor Department put out a letter indicating the gig economy workers, like those who drive for Uber and Lyft, are contractors and not employers. This reversal from the Obama administration will allow Uber and Lyft to treat their drivers as contractors rather than employers. While the letter isn’t fully effective across the board (because it is not binding on state courts and law) it puts gig economy companies on solid ground going forward with their workers operating as contractors. This will go a long way in keeping down Uber’s costs and allow it room to climb out from its unprofitability.
With gig economy companies taking up more and more of the market, it’s important for all businesses to keep apprised of what benefits may come to the behemoths and how other business need to adapt, and possibly take advantage of the same options. Doing this with an experience legal team will ensure a much smoother path forward for businesses needing to change.