Question

1. In class, we address the importance of maximizing shareholders’ wealth. However, it seems like maximizing stock prices does not make sense, because investors focus on short-term results and don’t care about long-term consequences. What do you think? Please discuss. 2. Uber Inc. is planning to issue an IPO this May. It is known as a ride-hailing business and just like Lyft. Both companies offer ride-sharing, carpooling, bike and scooter rentals for short trips on-demand. But Uber’s structure is way more complicated than its smaller rival: it also generates significant revenue from three other business such as Uber Eats and Uber Freight. Also, it operates in 63 countries and nearly 700 cities, compared to Lyft which only operates in the U.S. and Canada. Because of its complexity, regulators are more likely to scrutinize how Uber approaches segment reporting—often a sticky issue for companies with a mix of business lines and global reach. Uber executives also need to communicate the story of its varied businesses to experienced fund managers and retail investors who are considering buying stock in the company. According to your research on Uber and Lyft, will Lyft undertaking an IPO before Uber help it compete more effectively against Uber? Why or why not? Why are Uber's risk disclosures likely subjected to more scrutiny from the U.S. Securities and Exchange Commission than was Lyft? Will you invest in Lyft or Uber? Why or why not? Please discuss

Answer 1

1. It can be analysed from the fact that maximizing shareholder's wealth is significant finance objective function. It is so, because despite of long-term consequences, providing return to investors instantly boots their confidence. They not only invest and remain loyal towards firm but also word of mouth publicity is achieved. This adds to accomplishment of more number of investors in effective manner.

2. Uber is one of the fastest growing company in recent decade. IPO for undertaking more amount of equity shares is required for further attaining of amount in the best manner possible. Thus, more capital will be accomplished. Lyft should undertake IPO before than Uber does. It is because Uber will take on major and potential investors for attaining more capital which could be dangerous for Lyft, being a smaller rival. Uber's risk disclosures is subjected to scrutiny as it is an major firm in which all the compliance of auditing and financial statements would be made in a better manner. Thus, it can be recommended to invest in Uber as it will provide adequate, stable and long-term returns in effectual way.