Centaur1989
Joined 9 years ago
Karma
105
Submissions
5
Member since
Nov 27
Recent submissions
Comment · 6 years ago
Let's think in first principles here, shall we? Stocks (or equity) is a fractional stake in current and future earnings of the company. We know if a company declares bankruptcy, its liabilities have exceeded assets and equity is down to zero or negative. Debt holders have higher priority stake in the company, so the first thing that happens in ~100% bankruptcy filings is debt holders take ownership of all assets. Current equity is almost always wiped out. After restructuring, debt holders may issue new equity, which may be worth something - but is completely different from what is currently circulating right now. No matter how you look at it, Hertz stock currently is worth zero. When street price of an asset is higher than its intrinsic value - that's literally the definition of a bubble. One can easily make money trading a bubble asset, but should not conflate returns here with asset's ability to generate future income.
Comment · 7 years ago
>>When reasoning doesn't line up with facts, there are usually flaws in the logic.
I don't think there's an opposition of facts and logic here. Grab was founded in 2012 (https://www.grab.com/sg/about/), Ola in 2011 (https://www.olacabs.com/about.html), and GoJek in 2010 (https://en.wikipedia.org/wiki/Go-Jek). All of these were entrenched players in their respective markets when Uber decided to put up a fight. Uber gave the Grab and Ola's VCs no option but to double down, if they were to save their existing investments. In this race to bottom, it was Uber who blinked first. Losing SE Asia was not an existential threat to Uber, but definitely for Grab. Media likes to talk winners and losers, but Uber did end up taking 27.5% stake in Grab just to leave the market (https://techcrunch.com/2018/04/24/grab-uber-deal-southeast-a...). However, their fight in India with Ola continues. But to my initial argument - back in 2010-2012, we thought that the network effect of social networks (like Facebook) extended to ride-sharing services too creating high barriers to entry. We know now that isn't the case. Imagine how a VC would react today to a startup founder pitching a ride-sharing idea in a market where Uber/Lyft are already entrenched, given what we have learned from Lyft IPO and Uber's SEC filing. My argument may seem counterintuitive here, but I believe that the Uber/Lyft's revealed financials is what may ultimately save them. They have successfully managed to make the ride-sharing market unattractive (at least for 10x return seeking VCs).
Comment · 7 years ago
No. That's not how price collusion works. If Delta airlines started charging for 2nd baggage, and after their announcement United/American/Southwest follow suit, that's not a price collusion if it wasn't predetermined secretly through implicit and explicit signaling among the airlines. The other airlines had option of either increasing their margins by adding new fee, or keeping 2nd bag free and hoping to make more money with increased volume (profit = unit margin volume). They are free to choose former or latter in our capitalistic setup. If there aren't any easily available substitutes, and you don't expect some new entrant to come and distrupt you, first option becomes much more lucrative. Especially if you have negative unit margins, since with second option - negative marginshigher volumes = lots of losses
Comment · 7 years ago
People here seem to think that Uber/Lyft do not have any competitive moat. I disagree. What we seem to forget is that just because a VC can burn boatloads of money to capture ridesharing market from Uber/Lyft doesn't mean that they would. From a game theoretic POV, Uber and Lyft have signaled that they're ready to fight for survival in markets they are established in. Unless as a startup founder you can demonstrate that you can achieve lower cost structures than Uber/Lyft, no VC will fund their rapid growth (small offerings will still find a niche, assuming they don't get gobbled up). Uber/Lyft do have a VCs-will-not-race-to-the-bottom-with-them moat, and tomorrow they might as well raise their prices to turn profitable. Their biggest challenge is Waymo and SDC because if a competitor as significantly lower cost structure, all bets are off.