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Uber shares slump on company’s plans to cut spending, treat hiring as ‘privilege’

Uber CEO Dara Khosrowshahi said investor sentiment had changed
Uber CEO Dara Khosrowshahi said investor sentiment had changed   -   Copyright  Richard Drew / AP Photo
By Tom Bateman  & Reuters

Uber will cut spending and scale back hiring as investors cool on the tech sector, according to an internal email seen by Reuters.

"The least efficient marketing and incentive spend will be pulled back. We will treat hiring as a privilege and be deliberate about when and where we add headcount," Uber CEO Dara Khosrowshahi said in an email to staff first reported by CNBC on Monday.

Uber's new strategy was a response to the "seismic shift" in investor sentiment, the rideshare and delivery company boss said.

Uber's New York-listed share price fell by nearly 12 per cent to $23.05 (€21.83) on the news. The company's stock has lost more than 43 per cent since it first went public in 2019.

Tech stocks have plunged overall from the highs reached during the COVID-19 pandemic as rising inflation has driven central banks to raise interest rates, ending a long period of cheap borrowing.

Uber said last week its driver base is at a post-pandemic high, and the company expects this to continue without significant incentive investments, a sharp contrast to rival Lyft which has said it needs to spend more for labour.

Uber will now focus on achieving profitability on a free cash flow basis, rather than adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA), according to the CNBC report.

During the company's annual shareholder meeting on Monday, Khosrowshahi addressed investors' concerns.

"What we can do at Uber is to continue to execute in terms of top line, bottom line profitability," the CEO said, adding that the company's results and guidance surpassed analyst expectations. "We share your frustration".

Uber's latest earnings report said the company expects to generate "meaningful positive cash flows" for the full year.

Khosrowshahi added in his letter that Uber's food delivery and freight businesses need to grow faster, CNBC reported.

Uber did not immediately respond to CNBC’s and Reuters' requests for comment.