Here are some highlights of news items you might have missed today …
Uber Undervalued?
When word hit the streets that taxi- and limousine-calling app firm Uber had been valued at more than $17 billion, it sent shockwaves through the investment community, with many people complaining that it was nearly as much as Hertz and Avis combined. This is a company that basically exists as an app on your smart phone with very few actual assets, after all. But now some people are saying that it’s actually cheap, given the market that it is entering. That’s the view point of Andrew Ross Sorkin in the New York Times DealBook column.
“At a time when the word Internet is increasingly followed by the word “bubble,” it may be heresy to suggest that a darling of Silicon Valley could be properly valued, much less undervalued. But in the case of Uber, it may be true,” he writes.
“Think about the basic math. There are a lot of numbers floating around about the global revenue for taxis, but here are the basics: In the United States, the taxi business generates $11 billion annually, according to IBISWorld,” he adds.
Sorkin points out that Uber is even changing the way people get around in the cities that it operates in. People who never took taxis before are hopping on board in increasing numbers.
“In cities where Uber is operating, the business is clearly tapping new customers — people who didn’t take taxis or limousines before, or at least not nearly as frequently. The ease of pressing a button on your mobile phone and having a car magically appear can quickly become addictive,” he writes.
We’ve all been through this before — trying to judge the value of a tech-related startup. Some have continued to soar, bringing millions to investors. Others have gone bust and have been forgotten as quickly as they exploded on to the market. We have no recommendation on this one — just a tip: Tighten your seatbelt for a certain wild trip.
Luxury on the Road
Speaking of cars and values … Sales of luxury items — houses, cars jewelry — continue to outpace sales of retail goods that most of us can afford. And on the car front, BMW continues to lead the pack, just managing to edge out German rival Audi for the top spot. According to sales figures released by the companies, BMW AG sold 1,000 more vehicles in May than Audi, which is owned by Volkswagen AG.
But Audi, which is increasing its luxury-level offerings, is gaining ground. For the first five months of the year, its sales rose 12 percent, while BMW’s increased just 11 percent. BMW sold 153,023 vehicles in May, with its 5-series gaining 11 percent and the X5 SUV rising 63 percent. Audi sold 152,000, with the A3 model and the Q3 compact SUV leading the way. Mercedes, meanwhile, sold 134,031 vehicles, a 10 percent rise.
Market Value
Stock market operator IntercontinentalExchange has put a value on its exchange spinoff, setting it at $1.8 billion to $2.38 billion ahead of its IPO later this month.
ICE acquired Euronext as part of its buy of NYSE-Euronext last year, and it indicated from the start that it didn’t want to keep the European exchange operator for long term. Euronext runs exchanges in Paris, Amsterdam, Brussels and Lisbon. Euronext had merged with NYSE in 2007.
The question now is whether anyone will want to invest in an exchange with scattered assets and one that must compete with the big players when the shares begin trading, likely on June 20.
Corporate Pay Revolt
It used to be automatic — shareholders would accept a corporate remuneration report with 95 percent or more approval level. But in recent years, the approval levels have been falling. And for the second year in a row, shareholders at RadioShack Corp. have rejected it, with about 55 percent of votes cast against the proposed executive compensation. The previous year, 53 percent voted against it. Bloomberg reports that shareholders at Staples Inc. and Chipotle Mexican Grill Inc. have also turned down remuneration packages this year.
These votes are nonbinding on corporations, but a rejection sends a signal to the brass that policies — or people — need to be changed. Following word of the rejection of the pay package, RadioShack reported that its first-quarter loss widened to $98.3 million as sales slipped for the ninth quarter in a row. Chief Executive Joseph Magnacca said: “Overall, our first-quarter performance was challenged by an industry-wide decline in consumer electronics and a soft mobility market which impacted traffic trends throughout the quarter. In particular, our mobility business was weak due to lackluster consumer interest in the current handset assortment and increased promotional activities across the industry including the wireless carriers. This resulted in disappointing sales and gross margin performance.”
Even in this environment, he said, “We are making progress on our turnaround strategy. We are building the pipeline of new products that will bring differentiation and newness to our stores in the form of high-margin private brand and exclusive items, including those from new partnerships like Quirky and PCH.”
The results of that will tell if he’s earning his pay — listed at $8.84 million last year, according to regulatory filings, Bloomberg reports.
Change in Flight Pattern
United Airlines has joined other airlines in revamping its frequent-flier rules. Fliers will now earn “miles” based on dollars spent rather than actual miles in the air. United is matching a move made earlier this year by Delta Air Lines and, experts say, likely to be followed by American Airlines, where fliers still earn miles by the number of miles flown.
Observers say this will benefit the business flier over the regular traveler, as business people are more likely to pay higher fares for the same flight. “These changes are designed to more directly recognize the value of our members when they fly United,” said Thomas F. O’Toole, president of the airline’s MileagePlus service.
Under the plan, travelers will earn five miles for every $1 spent.
The change could affect how business travelers book travel — giving them an incentive to buy higher-priced tickets that award them more miles, the Chicago Tribune quotes Brian Kelly, of ThePointsGuy.com, of saying.
To read more about today’s biggest news, check out Mike Larson’s regular after-market Money and Markets column.
And if you have comments on any of the above topics, you can leave them in the section below.
Best wishes,
The Money and Markets Team
