Coronation's Strategic Investment Journey with Uber

In an age where investment decisions can shift global markets, South African asset manager Coronation Fund Managers has notably played its cards with significant acumen in its stake with Uber Technologies Inc. Coronation was an early investor in the US-based ride-hailing colossus, making its first move a month before Uber's initial public offering (IPO) in April 2019.

Humaira Surve, a capable analyst at Coronation, delves into the details of their venture interest in Uber. It's a story that began with initial apprehensions, ascended through careful research, and resulted in strategic shareholding adjustments in response to the market's volatile waves.

The narrative started with a spark of interest in Uber way back in 2016. At a tech conference in San Francisco, Uber's chief business officer at the time, Emil Michael, delivered revelations about the immense potential of the sharing economy and the under-utilization of personal cars. The figures were staggering: in the United States cars were used a minuscule 4% of the time. Michael's ambition was to see Uber evolve into a ubiquitous service both in the United States and worldwide. This foresight and zeal resonated with Coronation's investment philosophy, lighting the path towards their initial engagement with the company.

Intrigued by the opportunities within the gig economy, Coronation however faced a dilemma. Their comprehensive research highlighted not only the large addressable market that Uber could tap into but also flagged considerable regulatory risks and other growing pains.

Uber's journey to its IPO in 2019 was not without its turbulence. The company was ingrained in controversy, struggling to gain momentum against competitors such as Lyft, and grappling with significant cash burn. The jitters around these significant challenges had Coronation in a wary state when Uber officially went public.

Yet, it was the years of meticulous research and analysis that emboldened Coronation to eventually increase their stake, especially as share prices dipped. They recognized the tenet of economies of density – the idea that an incumbent with more drivers generates better utilisation – and the subsequent small economic advantages that truly differentiate market leaders in the gig economy.

Centrally, it was the appointment of Dara Khosrowshahi as CEO of Uber that turned the tide. Khosrowshahi's seasoned history in negotiating with regulators, complemented by reports of ameliorated corporate culture in Uber, instilled confidence in Coronation.

Over time, as Uber overcame regulatory hurdles and showcased sustainability and approaching profitability in its business model, Coronation bolstered its shares. However, as the market began to accurately capture Uber's value, and prices surged in 2023, Coronation rightly adjusted its holdings, demonstrating a strategic calibration to evolving conditions.

The journey Coronation Fund Managers has taken with Uber showcases a steadfast commitment to understanding the broader scope of the gig economy and the implications of market dynamics on investment decisions. Their proactive and research-oriented approach ensured they captured value for their clients, navigating the often tumultuous tech investment landscape.