Why did Uber shares fall 10% Tuesday? A Biden Administration proposal cuts deep

MOZCO Mateusz Szymanski

• Uber (NYSE:UBER) was left by the curb, Tuesday, as investors drove the ride-sharing giant's shares tumbled more than 10% due to uncertainty over potential changes in the employment status of the company's drivers.
• At issue was a proposal from the Biden Administration that would require the likes of Uber, its top rival, Lyft (NASDAQ:LYFT) and other companies to classify so-called "gig economy" workers and regular employee instead of independent contractors.
• In a statement, U.S Labor Secretary Marty Walsh said the problem with misclassification of workers is that it "deprives [them] of their federal labor protections, including their right to be paid their full, legally earned wages."
• Uber (UBER) has in many ways become the poster child for the gig economy, as it has maintained that its drivers are independent contractors with the freedom to choose when they work and set their own work schedules.
• Last week, RBC analyst Brad Erickson said Uber's (UBER) advantages in the ride-sharing market as one of the reasons why he cut his rating on Lyft (LYFT).

Comments

[siriusmarine]

Buy the dip!

[MY Capital]

@siriusmarine i agree with you, but you can’t completely dismiss the rule, the Biden admin wants to enact, what do you say to that?

[what the...]

If Uber drivers want to drive strangers around town, they should just work for a taxi company. Seriously any money they make go's right back into their vehicle. Plus they pay double social security tax compared to working for some one. They can't make real money because it's a set price anyways. Sorry but yeah, employees is what they really are.

[bill h illify]

@what the...
I disagree

[Kman312]

@what the... All these fools defending Uber only do so because they are long the stock and want it to go up. They don't truly believe Uber treats their driver's fairly or gives their driver's opportunity. It's essentially Squid Games. Maybe a few have learned how to eke out a living by hustling Uber's system but the vast majority of drivers are barely making enough to purchase a dinner after a full days work. I definitely want my government to intervene. It's almost as bad as child labor practices 100 years ago.

[MY Capital]

@Kyle Mandryk Uber is a company that’s in the business of making a profit, if they don’t make a profit, their drivers will make nothing.

[AlieGee]

Current admin destroying the economy. Don't get it. Who knows why?

[User 56360468]

There are already IRS rules on private contractors that could potentially disqualify some of these arrangements, depending on how much direction is given to these "contractors" on a day to day basis.

"Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? "

I am not so sure the IRS rules have been enforced as written on those tech companies using delivery people, either through an app or through contracts with private operators wearing Amazon clothing and driving Amazon-logo vehicles like Amazon hires. Which of these companies doesn't have very specific rules for drivers to follow? Any of them?

Sometimes when government isn't enforcing the laws already on the books, politicians see an opportunity to pass a new law that outlaws it again in a different way. That way they can take credit multiple times.

[dpwroc]

I don't see in any way that Govt is seeking taking 'credit' twice, in that there is not much codification at the federal level, in the US as to the definitions of labor in this new sector. Some... but not much.

Good points above, though I see, in the process to analyze... this is similar in process written in AB 25 in CA, made law, then voted out by referendum in state, by which the law enacted by the state vote was to override AB25 was subsequently tossed and nullified as unconstitutional do to it breadth as a multi-law (in essence) which was illegal to establish in the first place. But state's and Fed will use a similar litmus to measure of legal viability in labor practices, etc...

[easymoney222]

The Biden administration is scared they are losing out on tax revenue. The thing is, most rideshare drivers don’t want to be classified as employees.

[BeatingTheJoneses]

@easymoney222 ding ding ding

[dpwroc]

@easymoney222 The US government does deserve its tax dollars. Businesses, as everyone else, must pay in. Most everyone in the US depends upon this. This is not because of Biden. Biden does though, see the usefullness and practicality and in this most basic process.

This ongoing development is not about that, though, and is in fact about the treatment of labor. This has been an ongoing issue, in defining new and written law as it applies, now, and in modernizationto the "Gig." This discussion and debate has been ongoing since the beginning, and laws will take shape. This prospect is nothing new. Although Uber is functioning better intowards treatment of its drivers, but only because they must, coming out of Covid.

Uber has put itself in this position due to its past manipulation and treatment/management of its drivers. It's history in this is long and rich, perpetetual and easy to understand. It (UBER)has owned and abused, out of necessity of its own design and business model, in an effort establish even a penny of profit. Uber will continue to yolk its labor. this will be dealt with, and new laws will come into into play in in regard to this market. Uber will adapt, but not by its own design.

Largely, Uber drivers are clueless in the sense that they don't understand or fully understand Ubers business, and for this as well as other reasons use only the information given to them by Uber, to digest in UBERs projections of circumstances when laws do in fact take effect. The turnover rate is tremendous, to say the least. With out getting into that at all, I'll say that the the non-turnover segment of its drivers are well aware of Ubers faults, and are going to be able to reflect more practically on the realities of the industry, and their relationship to it. Ultimately, drivers are Uber, and they will have the magnitude to ensure by their influence to a higher degree what goes down, inside their labor, after laws take effect.

This opens up to the discussionn of Ubers' general line stating the it's gonna be mandated 'full time' and 'hourly' or clock-in, set hours type employment. I am not going to delve into these details of rationale here, but will say that this won't happen, at least in any shape as Uber has purported and projects towards it drivers. Uber needs its drivers. It is absolutley going to have to keep the same general practices of flexi-participation for their driver labor.

[Capital Gains]

I am not a investor in either but if this proposal goes through, neither will be able to retain as many employees and in the long run wouldnt that hurt the employees instead of helping them?

[dpwroc]

@Capital Gains it seems it would, based on what is being said by Uber, but the realities sit outside this subset of projection by them. Uber can and will adapt, and the drivers are going to be more so, in the drivers seat inclusive of fair pay and treatment.

[tboucher1]

Brandon destroys everything he touches.

[Mulder3535]

@tboucher1 absolutely he does!! This administration is anti Capitolism and Pro-Government control on everything! Is anyone happy with how things are being run now?? Happy with your IRAs 401Ks? How about Interest Rates home prices food and gas ⛽️ prices Border Crisis War with Russia 🇷🇺 the crashing Stock Markets for the last year? If not VOTE them Out in November. We have had it... enough is enough

[Towelieban]

@tboucher1 if you have to circumvent labor laws to stay in business then you should be bankrupt.

[bill h illify]

Marty Walsh is an absolute 100% embarrassment.

[tboucher1]

@bill h illify

Total clown. Former idiot mayor of Boston, now an expert on labor issues.