It’s no secret that the last few months have been bad for Uber. The company has been hit by scandal after scandal, the founder, CEO and half of the management team is out, and it’s locked in a massive legal fight with Google. Oh, and it’s still losing hundreds of millions of dollars every month.
A new report from Axios claims that Uber has had “multiple meetings” with the SEC about giving shares in the company to drivers. There’s a couple of reasons Uber would be considering such a dramatic move, but it all boils down to the same thing: Uber’s getting worried.
Details on any share compensation scheme are nonexistent as of yet, but there’s one reason Uber would be giving away stock: to keep drivers on the platform. Drivers are contractors, not employees, and they’ll only stick around for as long as it makes sense to be with Uber. Recent scandals have hurt Uber’s reputation but also its bottom line, as the #DeleteUber movement has picked up steam, and customers start switching to competitors like Lyft.
Traditionally, Uber has used cash to lure new drivers to the platform, and as a reward for completing a set number of trips per week. If Uber is planning some kind of stock incentive scheme, it would likely be for new drivers, as a loyalty program for existing drivers, and to encourage all drivers to complete a certain number of hours or trips.
The fact that Uber might be considering using stock to incentivize drivers could have something to do with its dwindling cash reserves. Uber lost $2.8 billion in 2016, and estimates put its remaining cash pile at $7 billion. At its current burn rate, that means Uber will be out of cash in two years. Although reducing cash incentives to drivers won’t magically make the firm profitable, it could ease the bleeding and give Uber more time to figure out its business model.