Every company that goes public has risks. Ride-hailing behemoth Uber filed paperwork to go public on April 11, and like so many consumer-facing tech startups, listed risk factors around liquidity, debt, and being extremely unprofitable. But we wanted to find out which risks associated with Uber’s business are most unique to Uber.
A machine-learning algorithm trained by Quartz looked at Uber’s outlined risk factors to assess which are the most distinctive. This is meant to show what Uber worries about that most other large public companies do not. Some of these risks it shares with ride-hailing competitor Lyft, which went public last month, but many are specific to Uber itself.
To evaluate how distinctive these risks are, the algorithm examined all the words used in the “Risk Factors” section of Uber’s IPO filing—a whopping 49 pages comprising 35,278 words—and compared them to the words in the “Risk Factors” sections of annual financial filings from the companies in the S&P 500. It uses a kind of (rudimentary) artificial intelligence called TF-IDF that identifies which words and phrases are most “distinctive” in the document compared to a corpus of related documents.
Here are a few unusual risks from our algorithm-powered top 50:
Uber itself (#3): Uber’s toxic culture was on full display in 2017, something the company actually details in its IPO filing. Uber mentions the #DeleteUber campaign that led hundreds of thousands of consumers to cancel their accounts within days, the Susan Fowler blog post that alleged sexual harassment, the “greyball” tool that prompted a federal probe in the US, the high-profile trade secrets lawsuit brought by self-driving carmaker Waymo, and a massive security breach that the company originally paid to cover up. “Our workplace culture and forward-leaning approach created significant operational and cultural challenges that have in the past harmed, and may in the future continue to harm, our business results and financial condition,” Uber says in its filing. The company also blames its culture for increased scrutiny from regulators, a lack of transparency internally, siloed teams, and general mismanagement, and says negative press damaged its brand reputation.
Restaurants (#4). No really, restaurants! Uber counts “restaurants” as both a competitor of its Uber Eats food-delivery service and customers it must compete for with other delivery services. If diners choose to go to a restaurant instead of ordering from it, that is less money for Eats. If restaurants choose to partner with a delivery competitor, such as DoorDash or Postmates, that is also a problem for Eats. Uber is particularly concerned with lacking access to the “most popular restaurants, such that our Uber Eats offering will become less appealing to customers and restaurants.”
Autonomous vehicles (#5): Former Uber CEO Travis Kalanick has referred to the company’s autonomy research as “basically existential,” possibly realizing how much more profitable a business Uber could be when it takes away its main cost—drivers. But the company is competing with myriad other companies to make self-driving cars a reality, including heavyweights like Alphabet and Detroit’s automakers. Uber also has to overcome the fact that it’s responsible for what is likely the only fatality by an autonomous vehicle to date: One of its cars struck and killed a woman in 2018.
Airports (#19): Rather surprisingly for a company that is primarily focused on ground-based transportation (at least for now), Uber listed airports among its risks. It’s not that crazy: 15% of Uber’s Gross Bookings came from trips that either started or were completed at an airport, and pickups at airports tend to be more heavily regulated than in other places. If cities cut off airport access for ride-sharing companies, as they have in the past, Uber could be in trouble. “We generate a significant percentage of our Gross Bookings from trips in large metropolitan areas and trips to and from airports. If our operations in large metropolitan areas or ability to provide trips to and from airports are negatively affected, our financial results and future prospects would be adversely impacted,” the company said in its filing.
Independent contractors (#21): Uber fought bitterly to keep drivers classified as independent contractors rather than employees. Were drivers to be considered employees, they would be eligible for benefits like health care and paid time off, and protected by minimum wage laws. The status of Uber’s drivers remains challenged in courts and government agencies in the US and abroad. In March, Uber agreed to pay $20 million to drivers in California and Massachusetts as part of a preliminary settlement in a pair of class-action lawsuits over its labor classifications. Uber says that if its drivers were classified as anything other than contractors, it would “incur significant additional expenses for compensating” them, particularly due to wage and hour laws. (The word “drivers” itself was the #1 term on our AI’s list.)
Violent and criminal activity (#36 and #37): Uber has been linked to many instances of both riders and drivers being harassed, raped, assaulted, or otherwise harmed. Just last week, for example, the Washington Post reported on a Seattle woman who police say in December was raped by a man pretending to be her Uber driver. In 2018, a CNN investigation identified 103 Uber drivers accused of sexual assault or abuse. Uber notes that such incidents can “adversely impact our brand, reputation, and business.” Uber says certain regions, such as Latin America, have faced increasing reports of the people on its platform being “victimized by violent crime, such as armed robbery, violent assault, and rape.” It adds that even claims that do not result in liability can be expensive to investigate and defend against.
Personal data (#43): How Uber handles its customers’ and drivers’ personal data repeatedly appears in its filing, and the CCPA—the California Consumer Privacy Act, this is the state’s version of Europe’s GDPR regulation—comes in at #42 on the risk list. (It was #21 on Lyft’s list.) Uber has in the past gotten itself into hot water for surveilling riders without their knowledge, and tracked journalists with a tool it called a “God View” of all the rides happening on its service at any given time. Enhanced jurisdictions could cut into the company’s revenue, as could any new fallout from unsolicited tracking of users, or data breaches of its servers—which happened in 2014. “Our technology platform and the platform user data it uses, collects, or processes to run our business is an integral part of our business model and, as a result, our compliance with laws dealing with the use, collection, and processing of personal data is core to our strategy to improve platform user experience and build trust,” Uber said in its filing.
This story was reported as part of Quartz’s AI Studio.