Story of Interest
Written By: Alexander Kamenskiy
North American Companies to watch:
1. Uber
On March 25, 2019, Uber Technologies Inc. announced that it will pay $1.4 billion in cash and $1.7 billion in convertible notes in its biggest deal that will grant it full ownership of leading Middle Eastern competitor Careem. This agreement comes after more than 9 months of gruelling negotiations that leave the Careem Brand, App and founding directors’ positions in-tact. This much-needed victory for Uber complements the company’s plans to IPO during the next month.
The deal enables Uber to claim dominance in a region with a growing demand for ride-hailing services outside of the United States. This is crucial as the company has recently sold its Chinese, Russian and Southeast Asian operations after sustaining heavy losses and investors are beginning to question whether the company is truly a global competitor.
The company hopes to leverage this claim when it is already expected to see a valuation of approximately $100 billion at IPO. The justification for this valuation has always been under scrutiny as the company has not turned a profit, and improved meagrely from a $2.2 billion loss in 2017 to a $1.8 billion loss in 2018. Bulls will say that investors need to base their valuation on top line growth, but 2018 Q3 revenue was $2.95 billion, up just 5% from Q2 and 2018 Q4 revenue was $3 billion, up just 2% from Q3.
Uber’s ability to leverage the April IPO and pitch itself as full transportation and logistics platform will be imperative to its success in an increasingly competitive space.
2. Bed Bath and Beyond (BBBY)^3.05 (21.99%)
On March 25, 2019 Bed Bath & Beyond’s board of directors received severe criticism from an investor group holding 5% of the company’s equity, in response, shares surged by more than 20% in value. This group comprises of Legion Partners Asset Management LLC, Macellum Advisors GP LLC and Ancora Advisors LLC, all of which demand the ousting of the 16-year CEO Steven Temares as well as the majority of the board.
It is no secret that Bed Bath & Beyond has struggled to stay up to date with changing consumer habits and tastes. The firm’s annual sales growth has dwindled to 1%, down from 23% in 2003, resulting in a loss of 85% of the company’s value in 5 years. The gravity of the situation is aggravated when considering peers Lowe’s and Home Depot have gained approximately 50% in value over the same period.
The company’s inability to adapt, excessive pay packages and a failure to hold management accountable are the main reasons why the investors believe a change in the majority of the board is required.
Bed Bath & Beyond initially responded in good faith, inquiring in suggestions to improve the company but the investors did not reciprocate. Instead, they chose to make public statements pressuring the company to take action. Bed Bath & Beyond replied by insisting on an extensive transformation that will streamline operational efficiency, and position the company for long-term success. That being said, shareholders are left in uncertainty as the firm has not released any timeline for a formal plan of action.
