(Reuters) – Uber Technologies is considering buybacks and dividends to shareholders as its cash flow ramps up, CEO Dara Khosrowshahi said at an event on Thursday.
“We are now entering a phase where we are increasingly thinking about returning the capital to shareholders, either through dividends or buybacks, more likely with buybacks,” Khosrowshahi said at the Goldman Sachs Communacopia + Technology conference.
According to its recent financial report, Uber reported an operating profit of $326 million for the second quarter ended June, marking its first-ever operating profit. Additionally, it generated over $1 billion in free cash flow during the same period.
This positive cash flow performance has led Uber to consider shareholder returns as a viable option for utilizing its growing cash reserves. Khosrowshahi mentioned that buybacks are the most likely method of returning capital to shareholders.
Buybacks involve a company repurchasing its own shares, which can increase the value of remaining shares and improve earnings per share. This option may be particularly attractive for Uber, as it has seen substantial growth in its cash flow.
Dividends, on the other hand, involve distributing a portion of the company’s profits to shareholders. While this can also benefit investors, buybacks have the potential to exert a more immediate impact on share prices.
Shareholders will likely welcome these plans, as they may result in increased stock value and potential financial gains. However, Uber’s management team will need to carefully consider the most effective way to allocate its capital for the benefit of both the company and its shareholders.
It remains to be seen when Uber will officially announce its plans for buybacks or dividends, but Khosrowshahi’s recent comments indicate that the company is actively exploring these options.
As Uber continues to expand its services and diversify its business model, generating consistent positive cash flow provides the company with greater flexibility to allocate funds and potentially reward its shareholders.
(Reporting by Yuvraj Malik in Bengaluru; Editing by Devika Syamnath)
Credit: The Star : Tech Feed
