Uber is under examination by US and foreign tax authorities, the company confirmed on Tuesday, saying it could face charges in key markets including the UK.
The news, contained in a regulatory filing and first reported by Bloomberg, is a new blow to the company.
Uber has lost about $12bn or 9% in value since its first day of trading as a public company on 10 May, a major disappointment.
In its first earnings report as a listed company, the company last week reported losses of $1bn for the first quarter of 2019, among the largest of any public company.
In its filing to US regulators submitted in April, Uber said the Internal Revenue Service (IRS) was examining tax years 2013 and 2014. It also confirmed it is under examination by other state and foreign tax authorities, and that its tax advantages are to be cut due to its “transfer pricing positions”.
Transfer pricing concerns normally refer to how a company books the transactions of goods and services among corporate subsidiaries, often as a way to shift reported income to low-tax jurisdictions, as in the infamous “double-Irish” manoeuvre deployed by big companies to avoid billions in tax exposure.
News of Uber’s tax audit comes one day after it was leaked that regulators are preparing investigations into anti-competitive practices at Google, Facebook and Amazon. An IRS investigation into Uber will probably reinforce the impression that political and regulatory winds are turning against big tech.
Uber said tax years from 2010 to 2019 could be at issue in a number of its key markets, including the US, UK, the Netherlands and India. The company said it has adequate cash reserves to meet its exposure.
Banks have begun research coverage of the company, at the end of a regulatory “quiet period”. Most analysts seemed to ride over Uber’s disastrous IPO, which was initially guide-priced at a whopping $120bn. The company ultimately went public at $80bn. Its current market value is $69bn.
Revenues are projected to climb 24% this year to $14bn but the company is on track to lose $4.4bn. According to Refinitiv data, three analysts from banks uninvolved in the Uber IPO recommend buying the stock, five have neutral ratings and none recommend selling.
The IPO has also brought the probability of higher prices for customers.
“We expect to deploy fewer consumer promotions,” the chief financial officer, Nelson Chai, said last week.
By some estimates, Uber’s fares must double if the company is to break even.
Writing at nakedcapitalism.com in 2016, industry expert Hubert Horan calculated that riders were paying only 41% of the cost of their trips.
“Uber’s growth to date is entirely explained by its willingness to engage in predatory competition funded by Silicon Valley billionaires pursuing industry dominance,” Horan wrote.
