How's this for timing: Just days after CNBC revealed that Uber co-founder Travis Kalanick had cashed in more than $1 billion in Uber stock since post-IPO lockup expired a couple weeks back (that's in addition to the shares he sold in the private market before the company announced the offering), London's transportation agency has for the second time determined that the ride-hailing giant isn't "fit and proper" enough to operate in the UK's capital city.
Of course, as we noted more than a week ago, Kalanick isn't the only Uber insider who has been dumping shares since the lockup expired. And after Uber's post-IPO performance, who can blame them?
Unfortunately for those who decided to hang on, London has just delivered yet another punishing blow to Uber's ever-shrinking market cap.
Just weeks after Uber's shares took a beating with the lockup expiry, Transport for London (the official name of the regulator in charge of London's cabs and livery drivers) announced on Monday that it had discovered more than 14,000 Uber rides were given in London by unauthorized drivers between late 2018 and early 2019.
Not only did these rides put passenger safety at risk, but they are a clear sign Uber isn't ready to handle the oversight issues necessary to comply with the agency's rigorous standards. Those who have been paying attention will recognize that this is the exact same reason the regulator gave last time it suspended Uber's license back in 2017.
Two months ago, Uber was granted a temporary license that expires Monday night at midnight in London.
Now that the license has been denied, Uber now has 21 days to file an appeal with a magistrate. The company can continue to operate in London until the appeals deadline, and then, once an appeal has been filed, it can continue operating until a final decision is handed down.
"Safety is our absolute top priority. While we recognise Uber has made improvements, it is unacceptable that Uber has allowed passengers to get into minicabs with drivers who are potentially unlicensed and uninsured," said Helen Chapman, director of licensing, regulation and charging at TfL.
The agency added that it was a "concern that Uber’s systems seem to have been comparatively easily manipulated."
It almost goes without saying that the decision is a tremendous embarrassment for CEO Dara Khosrowshahi, who won accolades after he helped Uber navigate its prior showdown with London shortly after replacing Kalanick at CEO. At the time, Khosrowshahi promised to do "the right thing - period" to bring Uber's safety standards up to snuff.
Yet, despite all the controversy, London regulators are once again threatening to seriously punish the company - London is one of Uber's top five largest urban markets and its largest market in Europe - for failing to ensure the security of its riders (predominantly female passengers, who face the highest risk during rides with drivers, who are mostly men). TfL cited the registration lapses mentioned above, along with other unspecified insurance-related issues, as the reasons for its decision.
TfL said it discovered most of Uber's alleged violations rather late in the license-review process, but, in a sop to Khosrowshahi, acknowledged that while the company has made "progress"...TfL doesn't have enough confidence in Uber's ability to stop these violations from recurring.
"Uber has made a number of positive changes and improvements to its culture, leadership and systems in the period since the chief magistrate granted it a licence in June 2018," TfL said in a statement on Monday.
"This includes interacting with TfL in a transparent and productive manner. However, TfL has identified a pattern of failures by the company including several breaches that placed passengers and their safety at risk."
It added: "Despite addressing some of these issues, TfL does not have confidence that similar issues will not reoccur in the future, which has led it to conclude that the company is not fit and proper at this time."
Ironically, TfL's decision comes just days after news broke that Uber is testing a new system to video-tape rides, and has been testing it out in Texas. This would allow security officials to have the footage handy in the event of a complaint by the passenger or the driver.
London Mayor Sadiq Khan said in a statement that he supported TfL's decision, and that "keeping Londoners safe is my absolute number-one priority" (of course, readers could be forgiven for thinking otherwise given the rise in knife-related crime since Khan arrived in office).
My statement on TfL's Uber decision. pic.twitter.com/h8tiQeFQBH— Sadiq Khan (@SadiqKhan) November 25, 2019
In a statement, Uber denounced TfL's decision as "wrong" and promised to appeal.
Uber shares tumbled in premarket trading, falling roughly 6% on the news.
For any investors who see this as an opportunity (assuming the losses hold until the market opens) to BTFD - we couldn't blame you. And we wouldn't be surprised to see one of Uber's biggest backers seizing the opportunity to chip away at a massive loss on its Uber stake. But just remember, the insiders - not just at Uber, but across the market - have already made their moves.