Uber enjoyed a meteoric rise to the top of the ridesharing industry. However, the company has struggled to turn a profit—even before the start of the pandemic. Obviously, COVID-19 hasn’t helped the situation as riders are staying at home and seeking alternative forms of transportation.
To try and solve its financial issues, Uber has often tried to diversify its business. The company has delved into everything from food delivery to trucking. Notably, in an effort to save cash, the company is selling a significant stake in its Uber Freight logistics division. A New York-based investment firm called Greenbriar Equity Group is reportedly coughing up $500 million in the deal.
Although Uber Freight hasn’t turned a profit, the segment is worth $3.3 billion. It will be interesting to see how this move plays out and how it affects Uber’s focus in the coming days.
Uber’s decision to sell a huge stake in its logistics business isn’t the first money-related move the company has made this year. It previously sold off its micromobility segment Jump to Lime, raising $170 million in the process. Shortly after that, it acquired Postmates for $2.65 billion in an effort to double down on the food delivery space. In the midst of lockdowns and social distancing, meal delivery has become more in-demand than ever.
However, Uber’s latest move isn’t about capitalizing on a new market. Instead, the rideshare giant is looking to conserve cash while trying to ride out the pandemic.
The company will retain majority ownership of the Freight division. It reportedly plans to use the $500 million in new funding to continue scaling the business.
For those who aren’t familiar, Uber Freight gives truck drivers a way to connect with shipping companies for contract gigs. It launched in 2017 before spinning off into a separate segment a year later.
Uber Freight is certainly a unique case. It has experienced significant growth over the past few years despite being unable to turn a profit. The segment brought in $211 million in the second quarter of 2020, marking a 27 percent increase year-over-year. Yet, that wasn’t enough to offset the segment’s $49 million loss in the same period.
Uber Freight’s CEO, Lior Ron, said in a statement, “We are tremendously proud of what we have accomplished in a few short years. We have led the industry with technology, transforming dated and analog processes to ensure that both shippers and carriers are equipped to succeed in a rapidly changing industry.”
The $500 million being contributed by Greenbriar should help Uber continue weathering the pandemic. Although its rideshare numbers likely won’t be increasing anytime soon, getting creative with segments like Uber Freight that aren’t as affected by the pandemic is a smart way to stay afloat.
As Uber tries to expand the logistics segment, the new funding should help. Still, it’s worth watching how much longer it takes for Freight to turn a profit.