What’s behind Uber's first-ever share buyback announcement?
Uber is kicking off its first-ever buyback program, aiming to buy back US$7 billion of its own shares.
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The backstory: Uber, the global company famous for its ride-hailing and food delivery services, has been a major player in transportation since it started in 2009, changing the game for traditional taxis with its easy-to-use app connecting riders directly with drivers. But it's also made big changes under CEO Dara Khosrowshahi's leadership since 2017. The company moved beyond just offering rides, doubling down on its restaurant delivery and expanding into things like grocery delivery and advertising to be more profitable. This helped Uber make it through the pandemic when lockdowns meant people needed food delivery more than they were looking for rides.
After expanding into Uber Eats and offering other services, Uber went public on the New York Stock Exchange in May 2019. Last December, Uber even hit a big milestone by joining the S&P 500 Index, which represents 500 of the largest companies on Wall Street.
More recently: There's been a boom in tech companies looking to offer returns to their shareholders. For example, earlier this month, Meta announced plans to repurchase an extra US$50 billion in shares and issue its first-ever quarterly dividend, meaning shareholders would finally see some of that cash. Similarly, Airbnb expanded its buyback program by US$6 billion.
The development: Uber is now kicking off its first-ever buyback program, aiming to buy back US$7 billion of its own shares after a solid financial performance in 2023. Last week, Uber shared its fourth-quarter results, which were even better than analysts expected. It was the first time Uber made a profit for the entire year since it became a publicly traded company. Also, Uber reported positive free cash flow for the fourth time in a row, totaling US$768 million.
After this announcement, Uber's stock price surged by 14%. Uber's CFO Prashanth Mahendra-Rajah has said he's optimistic about the company's financial outlook, calling the buyback program a "vote of confidence" that Uber will continue to do well.
Key comments:
"Today's authorization of our first-ever share repurchase program is a vote of confidence in the company's strong financial momentum," said CFO Prashanth Mahendra-Rajah in a statement.
"We will be thoughtful as it relates to the pace of our buyback, beginning with actions that partially offset stock-based compensation and working toward a consistent reduction in share count," said Mahendra-Rajah.
"We continue to see consumer strength and especially consumer strength as it relates to services," said CEO Dara Khosrowshahi to CNBC in an interview. "People are going out to dinner, they're going out to concerts, sports events, etc. And when people go out and they spend money, or when they want anything delivered to their home, Uber benefits."
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