Dividends and Pandemic gives tech darlings a reality check

Before the pandemic arrived, many people were dependent on tech companies to get around and get together. The companies became well known in the normal day so much Uber, Lyft and Airbnb was all you had to say and go the app on your phone. What has happened to them?

In an article by Barbara Ortutay, Dee-Ann Durbin and Michael Liedtke of the Associated Press, the companies were examined to see if they still are important as we all stay home or close to home. In the middle of April, Uber was down 25%, Lyft was down 28% and Airbnb and WeWork valuations were no where near what they were before.

Allen Adamson co-founder of Metaforce and a business professor at New York University noted with the market pressure will mean for all companies is the survival of the fittest. If they were going into the storm in bad shape, they will be in worse shape coming out.

Airbnb agreed to pay hosts $250 million for make up for some of the money lost to cancellations. AirDNA a data firm which helps property owners set rental rates, says the impact has been mixed. In New York City, bookings dropped 66%, but in the outer suburbs they were up as people left the city.

Two private equity firms – Silver Lake and 6th Street Partners invested $1 billion in debt and equity into the company as the expect Airbnb to emerge from the crisis in a stronger position.

Uber is to trying to reassure jittery investors than its aggressive expansion remains on track. Both Uber and Lyft are trying to preserve cash in part by emphasizing deliveries of food and other goods. Uber expects to end 2020 with $4 billion in cash or burning through $7 billion in 2020. On the driver side, even though drivers are delivering food, business is down 80%.

Companies that have benefited include Zoom Video Communications which has seen new highs and Blue Apron which was almost delisted, but revenues have increased as orders sharply increased.

Linking to dividend paying stocks, none of the above companies pay a dividend, for they are in the disruption phase in their industry. Hopefully by the end of May, companies can return to doing what they did before. It is important to notice companies which disrupt because they are linked to other companies. Before Airbnb, the choice was Bed and Breakfast or Hotels. Real estate was usually good for dividends, with the pandemic things look a little different depending on how long it lasts.

There are more questions than answers, till the next time – to raising questions.

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