Uber's practice of persistently raising capital from private investors is akin to a Ponzi scheme, according to veteran investor and Magellan Financial Group chief executive Hamish Douglass.
In a candid interview at the Stockbrokers and Financial Advisers Conference in Sydney on Wednesday, Mr Douglass lamented the dramatic losses awaiting Uber investors as automated driving technology permeates the market.
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"I see Uber as one of the stupidest businesses in history," Mr Douglass said. "The probability of this business not going bankrupt in a decade is like 1 per cent."
Pointing to Uber's high-cost, owner-driver model and what he described as its almost "valueless" user base, Mr Douglass said the San Francisco-based business' capital-raising style was like a "Ponzi scheme".
"They've got no advantage over anyone else when it comes to autonomous driving technology. They tried to steal it from Google, they've ended up in court. That whole side of the business is falling apart. It's constantly losing money and it's capital-raising strategy is a Ponzi scheme.
"All they do is keep increasing their private market valuation and someone always says, 'I'll put some money up, because next time they raise, it'll be at a higher price'."
The court case Mr Douglass refers to involves allegations by Waymo, the self-driving car division spun off by Google's parent company, that Uber has used stolen trade secrets to develop its own autonomous driving vehicles. The case is being heard in San Francisco.
"Some of the smartest investors in the world like to show off how they got access to Uber, but I think there's a 99 per cent chance that business will collapse," said Mr Douglass.
Uber Australia refused to respond to the criticism on Wednesday.
Mr Douglass' scathing comments come the same day Uber announced it has underpaid New York drivers tens of millions of dollars, admitting it had been incorrectly calculating driver earnings.
Investors have grown weary of the tech company in recent months, as it battles allegations it has evaded regulators and manages an internal investigation into sexual harassment and sexism claims.
Broker reports from the United States suggest Uber's private stock price has slumped 15 per cent to the mid-to-high $US30s.
The probability of this business not going bankrupt in a decade is like 1 per cent.
Hamish Douglass
Mr Douglass' criticism of the business comes just a week after venture capitalist Fred Wilson – famed for early stakes in Stripe, Twitter, Etsy and Twilio – said Uber's "win-at-all-costs" strategy would be the company's undoing.
"I think Uber had a strategy that didn't actually work, which was that they were going to run the table on the ride-sharing industry, and they were going to put everybody out of business by raising more money than anybody else," Mr Wilson said at a conference in New York City last week.
Uber, which is believed to be valued between $US60 billion and $US70 billion, is helmed by colourful businessman Travis Kalanick, who is understood to run Uber financing rounds in a tightly controlled way.
As such, Mr Wilson said the technology company's money is "only on paper".
"No one has made any money in reality," Mr Wilson said at the time. "Everything that's gone wrong is a function of their strategy to control everything and go very aggressively."
Magellan's tech vision
In a wide-ranging interview that covered the geopolitical threat posed by North Korea ("The US could try and assassinate him [leader Kim Jong-un], but it's illegal in the US to assassinate someone when you're not at war") and the trade relationship between the United States and China ("I think Trump will listen to the side that doesn't want to put up trade barriers, unlike the nutcases in the Steve Bannon camp") Mr Douglass discussed Magellan's heavy exposure to technology businesses, and the onslaught of Amazon on the retail and technology sector.
Mr Douglass heaped praise on Amazon founder Jeff Bezos and his ability to grow Amazon to a $US430 billion business after raising a total of only $US150 million.
"He's a hero of mine and I think Warren Buffett is right," said Mr Douglass. "He's the businessman of our generation."
Despite his admiration for Amazon's founder, the asset manager remains wary of just how clear the business' rate of return is.
Separating the various arms of Amazon – Prime, its content and expedited delivery subscription service; marketplace; and Amazon Web Services – have kept the asset manager on the side.
"I only buy things when I have a clear view of the rate of return," says Mr Douglass. "I've got teams trying to model exactly what that is for Amazon and we haven't got it yet. It's proven hard to work out a proper valuation."
But the reach of Amazon's disruption is certain and Mr Douglass mimicked a scenario where he and his "internet-of-things-connected house" discussed his weekly groceries.
"My house is going to tell me when I've run out of detergent and it's going to offer me the Amazon-brand cheap product," he said. "While Proctor & Gamble have 30 feet of their products lining Walmart and a 60 per cent market share, Bezos will assault that model.
"We are in a time when it doesn't work for investors to think three to six months ahead. The disruption in our markets is seriously deep."
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