It’s been a good week for shareholders in Uber, the ride-hailing giant, which reported solid third-quarter earnings on Tuesday. Investors seemed to have anticipated the report: The stock had been rallying for a couple of weeks. By the time the market closed on Friday, Uber was at $51.58, up 27% since late October and at its highest point since mid-2021. Uber now has a market capitalization of nearly $106 billion. You know what, though? Longtime shareholders might still feel they could have done better.
Uber’s stock price could be above $60 right now if the company had not handed out a bunch of shares to employees and others. Since the company went public in 2019, the number of shares outstanding has grown 22% from 1.695 billion to 2.06 billion. Imagine your spouse giving a portion of your joint equity in your house to a friend. If the house went up in value, you wouldn’t get as much when it’s sold as you would have otherwise. You wouldn’t be happy. Yet it’s longstanding practice for tech companies to issue stock to employees as part of their compensation. Of course, our analogy isn’t really fair. Your spouse’s friend likely hasn’t done anything to improve your house’s value, but employees are crucial to helping build a firm, particularly when it’s young. Rewarding them, and motivating them, makes a lot of sense. But it’s also worth recognizing the true cost of stock compensation for long-term public shareholders.
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