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(CNN Business)Just a few weeks after it lost out on a high-profile deal to acquire food delivery company Grubhub, Uber hasn’t given up on bolstering its own meal delivery service with an acquisition.

Uber (UBER) is now reportedly in talks to buy Postmates, a nine-year-old delivery startup, for about $2.6 billion, according to the The New York Times and the Wall Street Journal, citing sources familiar with the matter. A deal could be announced in a matter of days, or could fall through, the outlets reported.
Uber and Postmates declined to comment.

    Uber’s attempts to pursue big, pricey acquisitions in the food delivery market highlight a fundamental shift for the company. Uber, which started as a ride-hailing service, has long dabbled in other categories, including meal deliveries with its Uber Eats service. But those efforts have arguably taken on new urgency as the pandemic has simultaneously cut demand for its core rides business while leading to skyrocketing demand for meal deliveries.
    Uber Eats has been viewed as a bright spot for the company, especially as people increasingly stay at home.


    “At a time when our Rides business is down significantly due to shelter-in-place, our Eats business is surging,” Uber CEO Dara Khosrowshahi said on the company’s first quarter earnings call in early May. Khosrowshahi said the company’s rides business was down about 80% in the month of April.
    There’s just one problem for Uber as it looks to bet more on food delivery: the market is incredibly crowded. That could make it harder — and more costly — for Uber to gain market share.
    This month, Uber lost in its bid to buy Grubhub to a Netherlands-based company, Just Eat Takeaway.com, whose offer valued Grubhub at $7.3 billion. DoorDash announced it raised $400 million in new financing, valuing the company at nearly $16 billion. Meanwhile, grocery delivery startup Instacart raised $225 million, bringing its valuation to nearly $14 billion.
    Postmates is considered a pioneer in the on-demand delivery industry, but it is one of the smaller competitors in the US market. In May, the startup earned 8% of meal delivery sales in the US, according to analytics firm Second Measure. DoorDash, which acquired premium restaurant delivery service Caviar last August, is the US leader in terms of sales, with a 44% share.

      Postmates is keeping its options open, including potentially moving forward with an IPO, which could see the company make its Wall Street debut before the end of the summer, according to the Wall Street Journal.
      The San Francisco-based startup filed initial paperwork to go public in February 2019. The company has raised more than $900 million, and was valued at $2.4 billion in September 2019.
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      Exclusive: Amanpour interviews Uber's CEO

      (CNN Business)Uber and Lyft could soon be forced to reclassify their drivers in California as employees or cease operating in the state as part of an escalating legal battle over a new law impacting much of the on-demand economy.

      California Attorney General Xavier Becerra and a coalition of city attorneys intend to file for a preliminary injunction this week to force the two ride-hailing companies to comply with the new state law, according to a press release issued Wednesday.
      The move follows a lawsuit filed in May, which alleges the companies are misclassifying their workers in violation of the California law known as AB-5, which went into effect on January 1.

        “It’s time for Uber and Lyft to own up to their responsibilities and the people who make them successful: their workers,” said Becerra in a statement concerning the injunction the state is intending to file. “Misclassifying your workers as ‘consultants’ or ‘independent contractors’ simply means you want your workers or taxpayers to foot the bill for obligations you have as an employer. … We’re seeking a court order to force Uber and Lyft to play by the rules.”
        Under the law, companies must prove workers are free from company control and perform work outside the usual course of business in order to classify workers as independent contractors rather than employees.


        The lawsuit accuses Uber and Lyft of depriving workers of protections, including a minimum wage, overtime, paid sick leave, and unemployment insurance, that they would be entitled to as employees. Uber, Lyft and DoorDash have each put $30 million behind a ballot initiative, with additional support from Postmates and Instacart. If passed, it would exempt them from the AB-5 law, but offer drivers some benefits.
        “We believe the courts should let the voters decide,” Lyft spokesperson Julie Wood in a statement provided to CNN Business. “Trying to force drivers to give up their independence 100 days before the election threatens to put a million more people out of work at the worst possible time.”
        Wood said the company plans to oppose the push to reclassify workers.
        “The vast majority of drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under California law,” an Uber spokesperson said in a statement. “When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry.”
        The AB-5 law has long been viewed as a potential existential threat to many gig economy companies like Uber and Lyft, which built up their businesses in large part by treating their workers as independent contractors rather than employees. In addition to not receiving basic worker protections, drivers also pay their own expenses, including gas and vehicle maintenance.
        The renewed push to reclassify their workers in the state comes at an uncertain time for both companies as they grapple with the pandemic, which significantly cut demand for rides. Both Lyft and Uber have undergone layoffs and have long histories of steep losses.
        Shares of Uber and Lyft each ended Wednesday down more than 7%, while the Dow and S&P 500 were both down about 2.5%.
        Alison Stein, an economist at Uber, has said California’s actions could threaten an estimated “158,000 additional work opportunities each quarter for Californians who earn using Uber.”

          Weeks before the law went into effect, Uber began making a number of product changes to its app in California with the stated promise of letting drivers “reap the full independence” of the platform.
          A legal filing about the preliminary injunction requests a hearing be held on July 23.
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