Uber Warns of California Shutdown After Legal Woes

Uber CEO Dara Khosrowshahi on Wall Street
Spencer Platt/Getty

Uber could shut down services in California as early as Friday as the ridesharing company continues to fight the state over a new law that requires its gig economy drivers to be re-classified as employees. The threat of a stoppage comes after Uber posted a whopping $1.8 billion loss during the second quarter as the Chinese coronavirus pandemic continues to take a financial toll on the company.

Last week, a San Francisco judge gave Uber and Lyft ten days to appeal a ruling requiring them to comply with the law.  The companies filed their initial appeals, which were rejected. The ten-day period is set to expire Thursday unless the courts grant the defendants a last-minute extension.

Uber CEO Dara Khosrowshahi recently told MSNBC that if the company shuts down service in California, the suspension would likely last until November as the company awaits voters’ decision on California Proposition 22, which would essentially reverse the new law and exempt gig drivers from being treated as employees.

Uber Eats will likely continue to operate in the state since food delivery drivers aren’t impacted by the California law, according to multiple reports. Uber Eats exceeded the company’s ride-sharing business in terms of revenue during the second quarter as consumers and businesses continued to curtail their traveling due to the virus.

The company reported a staggering $1.8 billion loss for the second quarter as its ride-share bookings collapsed by 75 percent compared to the year-ago period, falling to $3 billion from $12.2 billion. Meanwhile, food delivery orders jumped more than two-fold from $3.4 billion to $7 billion during the quarter.

Uber has never posted a profit but has continued to thrive thanks to large cash holdings. The company ended the quarter with cash and other short-term investments of $7.8 billion, down sequentially from $9 billion in the first quarter.

Uber CEO Khosrowshahi said that Uber Eats has helped the company to hedge its losses. He also said the company’s global presence has been a boon, as some territories exit lockdown sooner than others.

“We are fortunate to have both a global footprint and such a natural hedge across our two core segments: as some people stay closer to home, more people are ordering from Uber Eats than ever before,” he said in Uber’s earnings release.

Uber has been adamant that it won’t comply with the California law, which went into effect January, arguing that the company’s core business is providing an information platform, not driving services.

Shares of Uber and competitor Lyft fell sharply in midday trading Thursday, with Lyft shares tumbling more than 6 percent and Uber dropping more than 2 percent.

Follow David Ng on Twitter @HeyItsDavidNg. Have a tip? Contact me at dng@breitbart.com

 

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