Uber Technologies Inc. is considering selling its freight logistics unit as a separate publicly traded firm and is already discussing with potential advisers regarding its options. This is an effort of the company to solely focus on its ride-hailing and food-delivery services.
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LNDON, ENGLAND - NOVEMBER 25: In this photo illustration the Uber logo is displayed on a phone in front of Tower Bridge on November 25, 2019 in London, England. Transport for London announced today, Monday, that Uber's license won't be renewed after it expires at the end of this month, November. Uber announced that they will appeal the decision.
Launching as a Separate Firm
Uber Freight logistics unit has been considered to be in a sale as a separate publicly traded company. According to Reuters' report, Uber technologies is already discussing its options with several advisers privately.
This decision of the company is not yet decided and plans could change anytime soon. One of the publication's sources stated that an IPO is a more likely outcome. If Uber lands on an IPO, this may not happen until next year depending on market conditions.
Uber Chief Executive Officer Dara Kosrowshahi would be given a chance to focus on its services once the freight division has been spun off, including the growing ride-hailing and food-delivery units. Meanwhile, the freight division runs by itself and has struggled in trucking.
Compared to other divisions of the company, Uber Freight faced more challenges. Aside from the trucking companies with those seeking to transport loads and operating as an individual division, the unit also announced a 3% workforce reduction in January affecting 150 employees.
During the company's fourth-quarter earnings call, Chief Financial Officer Nelson Chai argues that struggles occur because of a cyclical downturn in business. "We do expect that you'll see us getting some traction there, but the overwhelming cycle that's going on right now more broadly on the freight industry is going to continue to impact our business," the CFO stated.
Uber Freight
Bloomberg reported that Uber Freight was launched in 2017 as the company acquired logistics. This division connects truckers with different shippers as the middleman for both parties in the trucking business.
In 2020, the company sold a stake in the freight unit for $500 million to investors. Uber then acquired logistics company Transplace last 2021 for $2.25 billion. This was previously owned by TPG.
The freight division comprises 18% of the company's overall revenue with 43% growth from the previous year to $1.5 billion during the fourth quarter. Meanwhile, Uber's total revenue for Q4 was $8.6 billion, beating the analysts' estimates overall. Proving that the demand for rides and food deliveries exceeded expectations in the market despite the economic state.
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As Uber calls itself the "largest logistics cloud" ever built, Wall Street Journal reported that the company is still a middling player in the market of the traditional freight industry as it is dominated by much larger companies, with the century-old C.H. Robinson leading.
Khosrowshahi stated, "The shipping markets have gone negative pretty substantially, and that has had a negative effect as it relates to Uber freight business in terms of top-line growth and margins as well."
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