What happened
Investors really slammed the brakes on Uber (UBER 1.67%) stock Thursday. The second-to-last day of the week saw the ride-share king's share price tumble by nearly 5%, following a news media report that it's putting a piece of its business up for sale.
So what
This afternoon, Bloomberg published an article stating that Uber is considering either a spinoff or a sale of its Uber Freight unit. Citing unnamed "people familiar with the matter," the financial news agnecy said the idea is to whittle the company down to its core competencies of ride-hailing and food delivery.
The article's sources said that Uber is discussing such possibilities with potential advisors, who also were not named. A decision likely won't be reached soon, and there's no guarantee the company will follow through with any divestment.
If Uber detaches the freight unit, it's most probable that this will occur in the form of an initial public offering (IPO).
The company has been doing better than many expected, including analysts, largely because of the ride-sharing and food delivery operations. The ride for Uber Freight, meanwhile, might be choppy. Management is expecting a cyclical downturn in the business this year. In January, Uber announced that it would enact job cuts at the unit amounting to roughly 3% of its total workforce. Uber has not yet officially commented on Bloomberg's report.
NYSE: UBER
Key Data Points
Now what
It's always cause for concern when a business is (apparently) contemplating a sell-off of one of its divisions. That's a sign that it either doesn't fit well with its core operations, and/or is underperforming the rest of the company.
Uber Freight never felt like the most comfortable fit with its current parent, so perhaps this move would be a positive development. Investors shouldn't necessarily be discouraged that management might be considering this.
