Uber Makes the Cut

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As the markets closed last Friday, speculations regarding Uber’s inclusion in the S&P 500 were confirmed, with the official induction scheduled for Monday, December 18, 2023. Uber, which went public over four years ago at approximately $42 per share, faced numerous challenges, grappling with regulatory issues, driver compensation concerns, and profitability struggles.

It wasn’t until the second quarter of 2023 that Uber achieved profitability. The company’s path to profitability involved significant measures, including a workforce reduction of more than 3500 jobs, improved profitability in the delivery business ahead of projections, and addressing structural issues within the company’s cost framework. Consequently, Uber has now met the criteria for becoming a member of the prestigious S&P 500.

The period between the official announcement and the induction date provides a window during which stock prices typically experience a rally. Hedge fund managers often initiate share acquisitions in anticipation of the stock’s inclusion in the index. However, whether to swiftly incorporate Uber into one’s portfolio depends on individual risk tolerance as an investor.

While Uber has demonstrated increased reliability as a company, warranting its addition to the S&P 500, it remains a venture with inherent risks. Ongoing disputes with certain states regarding the classification of drivers as independent contractors rather than employees and recurrent driver threats of boycott pose ongoing challenges. Moreover, it’s noteworthy that Uber does not pay dividends.

Therefore, if considering the addition of Uber to one’s portfolio, a cautious approach is advisable, taking into account all associated risks. It’s conceivable that the stock might experience fluctuations, possibly dipping once formally added to the S&P 500 on the 18th of this month.