Uber shares pop on inclusion in S&P 500

Uber
shares
rose
5%
in
extended
trading
on
Friday
after
the
ride-hailing
company
was

added
to
the
S&P
500
Index,
replacing


Sealed
Air
Corp.

The
change
will
take
place
prior
to
the
open
of
trading
on
Monday,
Dec.
18,
according
to
a
press
release.

A
company’s
stock
price
often
rises
on
news
that
it’s
joining
the
S&P
500
because
fund
managers
who
track
the
benchmark,
which
gets
updated
each
quarter,
have
to
acquire
the
shares.
Companies
also
have
to
meet
certain
valuation
and
profitability
requirements.

Uber
shares
debuted
on
the
New
York
Stock
Exchange

in
2019,
but
the
company
was
burning
cash
as
it
had
to
pay
drivers
enough
money
to
stay
competitive
in
a
low-margin
business.
Its
preferred
metric
was
adjusted
earnings
before
interest,
tax,
depreciation
and
amortization,
or
EBITDA.

Most
of
Uber’s
adjusted
EBITDA
comes
from
mobility,
but
the
company
made
its
delivery
business
profitable
faster
than
planned,
after
recession-fearing
investors
became
more
averse
to
investing
in
money-losing
companies.
Growing
advertising
revenue
has
also
contributed
to
Uber’s
profitability.

Uber

eliminated
more
than
3,500
jobs
in
2020,
and
executives
have
since
worked
to
improve
its
cost
structure.
For
example,
they
reduced
the
cost
of
deliveries.
Uber
reported
net
income
of
$221
million
on
$9.29
billion
in
revenue
in
the
third
quarter,
and
in
the
past
four
quarters
altogether,
it
generated
over
$1
billion
in
profit.

“Nelson
[Chai,
Uber’s
outgoing
finance
chief]
and
my
goal
is
to
build
a
company
that
can
compound
top
line
rates
at
very,
very
attractive
rates
and
continue
to
improve
margins
over
a
period
of
time,”
Uber
CEO
Dara
Khosrowshahi
told
UBS
analyst
Lloyd
Walmsley
at
an
investor
meeting
in
December
2021.
“You’ve
seen
those
long-term
compounders
and
margin
increasers
and,
you
know,
the
greats
of
the
world,
the
Googles,
the
Facebooks,
the
Microsofts
of
the
world,
and
we
aspire
for
no
less.”

According
to
S&P’s
rules,
members
of
the
index
must
have
positive
earnings
in
the
most
recent
quarter
and
over
the
prior
four
quarters
in
total.
Constituents
of
the
index
must
have
an
adjusted
market
cap
of
at
least
$14.5
billion.

Uber
has
a
market
cap
of
about
$118
billion,
while
the
median
market
cap
of
companies
in
the
S&P
500
is
just
over
$31
billion.

WATCH:

Uber
into
the
S&P
500