Following its highly disappointing IPO launch earlier this year, ride hailing giant Uber immediately went for cut down in its global workforce count. And it was only a matter of time that Uber’s India operation will also face the brunt. So on Tuesday the San Francisco based company announced that pink slips will be handed over to its 10-15% employees working in India.
However, the latest layoffs won’t just have impact on the ride hailing unit as heads are expected to roll down even from UberEats – company’s food delivery unit. Interestingly, the announcement about latest layoffs has come at a time when CEO Dara Khosrowshahi is expected to visit India later this year. But media reports claim that Khosrowshahi’s upcoming visit has no connection with layoffs.
San Francisco headquartered company’s decision to go for major layoffs in the Indian market hardly comes as a surprise; considering that the Indian market contributes merely 2% to its overall global revenue but makes for a large part of its operational expenses.
Ola’s main rival even tried to sell off its food delivery business to Swiggy and Amazon but the talks apparently failed due to differences over market valuation. Uber was trying to sell off its Indian food delivery business even before its IPO launch in order to streamline its balance sheet and thereby soothe investors.
Now that the ride hailing giant’s IPO turned out to be a huge dud, investor’s pressure to streamline its global operation has only increased further. Currently, the company’s stock is trading at $32, 10% lower than its IPO price. Its record loss of $5.2 Bn reported during the recent second quarter result hasn’t really helped the matters much either.
Following Uber and Slack’s lackluster IPO and WeWork’s IPO botch, investors are seriously getting jittery over these high profile startups that at one point boosted high market valuations. In its hey days, Uber was valued at whopping $60-70 bn and proudly carried the tag of being the world’s most valued startup.
But post IPO disaster, Uber’s market valuation has obviously crashed. Not to mention now the investors are increasingly questioning the fundamentals of startup valuation. Its like outcry from global investors that startups need to come out of the valuation bubble and smell the coffee.