The Uber ride-sharing app suffered its first U.S. state-wide ban last week when a Washoe County, Nevada court made a preliminary ruling that the company operates “in all ways” like a taxi business. Uber suspended all operations in Nevada and said it would work with state officials to become legal. But with the company bleeding cash, Uber has suffered a series of bad luck in the last two weeks that will seriously undermine its valuation.
The Nevada Transportation Authority has requested and received an injunction against Uber Technologies Inc. for operating as a taxi service. Nevada regulators based their request for the injunction on Uber’s refusal to comply with state laws for carrying comprehensive insurance, which officials deem a threat to public safety, according to Reuters.
Uber spokesperson Eva Behrend said that the court’s decision would cause the loss of over 1,000 jobs in the state, and emphasized that Uber is committed to work with Nevada officials to forge a modern regulatory structure that would benefit all Nevadans with the flexibility and cost-saving from the shared economy pioneered by Uber.
Uber’s lawyers argued that because the company is in the Internet app business, it is not in the direct provision of transportation and therefore is not subject to laws regarding individual transportation. But Nevada Chief Deputy Attorney General Gina Session argued that Uber is operating as a common motor carrier and therefore subject to all state regulations, according to the Las Vegas Review-Journal.
The latest ban would normally be seen as a devastating event for most companies. But Uber has been suspended in several cities in the U.S. and Canada. The company has even been banned by some European and Asian nations. In each case, Uber has then negotiated with officials and used viral lobbying to gain regulatory approval.
Uber has already collected 18,200 signatures in a Nevada online petition to lobby Governor Sandoval and State Attorney General Masto for cooperation.
But Uber’s alleged scorched-earth strategy for political retaliation against those who oppose the company’s business model was outted by Buzzfeed. The influential blog reported that Emil Michael, Uber’s Senior Vice President of Business, made a number of disparaging comments and threats during a dinner with media executives.
The comments, later confirmed by Uber’s spokesman, included plans to spend “millions [of] dollars” to hire opposition research teams to investigate reporters who wrote negatively articles about Uber. Uber Chief Executive Travis Kalanick was so shaken by the public storm that he was forced last week to pen a detailed apology on Twitter.
Breitbart reported on November 28 that Uber is bleeding huge amounts of cash in a price war over market share in India. The company appears to have already burned through $1.2 billion VC cash it raised at an eye-popping $17 billion valuation in June.
Bloomberg two weeks ago reported that Uber was seeking another $1 billion to finance its international expansion in a VC deal valuing the company at $35-40 billion. But Uber’s valuation must have been hammered with the combination of an India price war, the journalistic ethics scandal and ban in Nevada. Running out of cash quickly, Uber needs to raise money at whatever valuation it can get.
Chriss suggest that if you are interested in how politics affects business, please click on “U.K. Demands American Internet Companies Agree to be Spies“