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Is Alphabet Pushing Investors away from Uber?

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Dec. 4 2020, Updated 10:52 a.m. ET

Investors selling Uber stakes

At a time when Uber is entangled in a bitter dispute with Alphabet’s (AAPL) autonomous driving arm, Waymo, reports have surfaced of some longtime investors trying to sell their stakes in the ride-hailing company.

A number of Uber investors have contacted the company’s board with requests to sell their shares, according to a recent Bloomberg report. Those investors include venture firm Benchmark, an early Uber investor and a key player in the June ouster of Uber’s CEO Travis Kalanick. The report stated that Benchmark discussed selling a portion of its Uber stake to SoftBank, the parent company of US (SPY) wireless operator Sprint (S).

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War over technology ownership

Waymo has sued Uber, alleging that the ride-hailing company illegally benefited from its technology related to autonomous driving systems. Besides Waymo and Uber, other companies working on self-driving systems are Ford (F) and Tesla (TSLA).

The litigation not only poses the risk of financial loss for Uber if found on the wrong side of the law, but it is also a distraction to the company at a moment when it is facing growing competition from domestic rivals such as Lyft and overseas rivals such as Grab.

The matter is complicated considering that Uber still doesn’t generate profits. The above chart shows how the company and rival Lyft fared in 2016.

Leadership crisis and competition threat

The Waymo litigation, the leadership crisis, and escalating competition appear to be scaring investors away from Uber. Besides Kalanick, several top executives have recently departed from Uber amid claims of a toxic corporate culture.

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