Uber Offers US$750 Million in Debt, Shuts Down Jump in MexicoBy MBN Staff | Wed, 05/13/2020 - 13:39
Uber is making a lot of headlines lately. The company will place US$750 million in five-year bonds for working capital and other general corporate purposes, which may include acquisitions and strategic transactions, according to the US Securities and Exchange Commission (SEC).
The debt comes at a time when the ride-hailing company seeks to acquire Grubhub, its competition in the food delivery business. However, according to CNBC, the companies have not agreed on a price for the acquisition. The debt placement suggests that Uber may be looking to boost its liquidity for its plans to acquire Grubhub, says specialized site The Street.
In the midst of the crisis unleashed by COVID-19, Uber identified a business opportunity that cannot be missed. In 1Q20, the Uber Eats division gave a big boost to the company's revenue of US$3.543 billion, 14 percent more than in 1Q19, as users increased food orders by 52 percent. On the contrary, the number of trips was reduced 3 percent worldwide.
"While our Rides business has been badly affected by the pandemic, we have taken quick steps to preserve the strength of our balance sheet," Uber CEO Dara Khosrowshahi said in a statement. "Along with the increase in food delivery, we are encouraged by the first signs in markets that are beginning to reopen."
Meanwhile, Grubhub reported a 12 percent sales increase in 1Q20 compared to the same period a year earlier.
Against this gloomy background, Uber is also cutting costs globally. A few weeks ago, the company said it terminate its Uber Eats service in seven countries and that its Careem subsidiary in the Middle East would fire 31 percent of its employees. “As we have discussed several times in the last few weeks, the crisis brought on by COVID-19 has put our dream and future impact at significant risk,” Careem’s Chief Executive Mudassir Sheikha said on a blog.
Part of this strategy also includes transferring Uber’s bike and scooter business to Lime to invest more capital in the startup. "Uber is merging its Jump business with Lime. This means that the Jump operation in Mexico City, as well as in the cities of Sao Paulo, Santos and Santiago, will be discontinued," the company said in a statement.
Just a few months after completing a year of operation in Mexico, Jump stopped providing its services since Friday of last week.