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WSJ: Uber, Lyft Investors Should Be Aware Of 'Unusual' Metrics

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WSJ: Uber, Lyft Investors Should Be Aware Of 'Unusual' Metrics

Ride-hailing company Uber Technologies Inc (NYSE: UBER) would prefer its investors focus on its "core platform contribution profit" line rather than its operating loss, because these "unusual alternatives" for measuring performance look much better, The Wall Street Journal reported Tuesday.

What Happened

Uber made $940 million in 2018 — if investors were to look solely at its core platform contribution profit line, WSJ said.

Similarly, rival Lyft Inc (NASDAQ: LYFT) recorded a $921-million contribution profit last year.

Both companies ended 2018 with deep losses, although they may argue these type of financial metrics better measure their business.

Uber's "contribution profit" doesn't include hundreds of millions of dollars in R&D expenses, while Lyft said the metric is a measure of its "ability to achieve profitability," according to the newspaper. 

Why It's Important

The "creative accounting" used by unicorn companies today is similar to what was seen in the late 1990s, WSJ said.

Lynn Turner, chief accountant at the SEC< lamented in 2000 about companies that issued "EBS earnings reports" — an acronym for "Everything but Bad Stuff," the publication said. 

Howard Schilit, a forensic accountant, told WSJ that early investors are trying to find a "sucker" who will buy the stock in the public market. 

"In order to sell the deals, they make up a fact pattern that is nonsensical."

What's Next

Lyft is among the multiple tech companies that offer supervoting shares to founders, so it is unlikely shareholders can push for any change in how it reports financial metrics, WSJ said. 

Related Links:

Large Bearish Lyft Option Trades Suggest There Could Be More Downside Ahead

How I Traded The Uber IPO For A Profit

Photo courtesy of Uber. 

Posted-In: ride-hailing Wall Street JournalMedia Best of Benzinga

 

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