UBER – CDS 195bps, Base Case iCDS 56bps, Negative Case iCDS 71bps, 2027 7.500% Bond YTW of 5.947%, iYTW of 4.053%, Ba3 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need
May 19, 2023
- Credit markets are materially overstating credit risk with a YTW of 5.947% relative to an Intrinsic YTW of 4.053%, while CDS markets are overstating credit risk with a CDS of 195bps relative to an Intrinsic CDS of 56bps. In addition, Moody’s is overstating UBER’s fundamental credit risk with its Ba3 credit rating four notches below Valens’ IG4 (Baa2) credit rating.
- Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. UBER’s compensation metrics should drive management to focus on all three value drivers: asset efficiency, margins, and top-line growth, which should lead to Uniform ROA expansion and increased cash flows for servicing obligations. Moreover, most members of management are material owners of UBER’s equity relative to their annual compensation, indicating they are aligned with shareholders to pursue long-term value creation for the company. Finally, management has low change-in-control compensation relative to their average annual compensation, indicating they are not sufficiently incentivized to pursue a takeover or sale of the company.
- Earnings Call Forensics™ of UBER’s Q1 2023 (5/2/2023) call highlights that management is confident they can sustain Mobility and Delivery business growth and that they can continue to see results that exceed their internal plans. Furthermore, management is confident they can improve retention rates, thereby driving an increase in membership.
