Uber Technologies Inc. (NYSE: UBER) is no stranger to controversy. After taking lead in the ride-hailing business, Uber has finally come public. The analysts gave Uber solid ratings for the most part, but the IPO performed poorly. The board ousted founding CEO Travis Kalanick after scandals threatened the company’s future, and now Chief Executive Officer Dara Khosrowshahi is making a more centralized power structure.
Barney Harford, chief operating officer, is leaving Uber. Chief Marketing Officer Rebecca Messina also has agreed to leave her role at Uber, but this is less than a year on the job.
What is interesting here, and what will rattle the nerves of at least some investors, is that if these positions were part of the mix ahead of the IPO are they suddenly not so great now that the IPO did not exactly act the best after its debut on the market?
As far as how to interpret this departure news, it may boil down to a series of “He said, she said.” And when that happens there are almost always going to be some doubters.
An SEC filing from Friday afternoon dropped the news. That statement said:
On June 7, 2019, Uber Technologies, Inc. (the “Company”) announced a number of leadership and organizational changes. Among other changes, Barney Harford, Chief Operating Officer, and Rebecca Messina, Chief Marketing Officer, will be leaving the Company.
In connection with these departures, Andrew Macdonald has been promoted to Senior Vice President, Global Rides, where he will oversee teams that manage the Global Rides business, Community Operations, Safety and Insurance, and Uber for Business. Jason Droege, who leads the Uber Eats business, will continue to lead Uber Eats, but will report directly to the CEO along with Andrew Macdonald as co-managers of our Core Platform business segment. Mr. Harford will stay until July to help with transition. In addition, Jill Hazelbaker, who currently oversees Policy and Communications, will assume responsibility for the Company’s Marketing function.
CEO Dara Khosrowshahi has reportedly sent an email to employees that the move is to eliminate Uber’s COO position for a more hands-on control over Uber’s main businesses of ride-hailing and food-delivery. Harford is set to step down on July 1. Khosrowshahi is also now combining the company’s marketing, communications and policies team all into one group for a consistent and unified narrative for customers, media and other interests.
Uber’ $45 per share IPO price seemed tame after Lyft’s IPO performed so horribly, but there were continued concerns and pressure with a weak market in May that took Uber’s shares down almost 20% in total. After hitting a post-IPO low of $36.08 Uber shares were last seen at $44.16 as of Friday’s close.
According to the Wall Street Journal, the CEO message is that after the IPO it was a good time to simplify the organization to set the company up for the future. Harford was very well compensated with a 2018 pay package of $48 million, but last summer he was also in a controversy after internal complaints of making racially insensitive remarks which he apologized about. The WSJ also noted a trend where larger companies have been eliminating their COO roles since 2000.
Meanwhile, a Barron’s weekend report says that Uber’s stock may be back but investors should not take a ride here. Barron’s has the same parent company as the Wall Street Journal.
Over the weekend, 24/7 Wall St. was emailed a statement from a group called Chief Outsider about Uber’s management changes. Jim McDonald, a Partner there, noted that eliminating the top operations and marketing officers won’t build confidence in Uber’s analysts and shareholders’ minds after a disappointing IPO and a stream of PR missteps. His statement said:
There’s nothing wrong with streamlining a dysfunctional company, but eliminating the top operations and marketing officers is not going to build confidence in Uber’s analysts and shareholders’ minds after a disappointing IPO and a stream PR missteps. Coupled with the basic Uber business model—which beyond quick-response convenience is not very consumer friendly with market pricing that can opportunistically gouge and with variability of vehicle and driver quality—this is only good news for Uber’s competitors.
Seeing major change like this would be one thing if the market was giving a resounding reception to the company. That hasn’t been the case, at least so far, for Uber. The company still has an ever-growing string of operating losses that is only going to keep growing. The reality is that ride-hailing customers who use Uber (or Lyft) should be expecting price hikes sooner rather than later. If a company is forced to operate with higher costs to its customers for it to remain viable, guess what will happen.