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Uber Technologies Inc(UBER-N)

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Why Uber Stock Was Pulling Back Today

Motley Fool - Thu Sep 21, 11:31AM CDT

What happened

Shares of Uber Technologies (NYSE: UBER) were stuck in a rut today as the transportation specialist seemed to take a hit from a legal dispute in the European Union (EU) as the company threatened to pull its drivers out of that region, pending a new legal requirement.

As of 11:29 a.m. ET on Thursday, the stock was down 4.3%. Meanwhile, the S&P 500 was down more than 1% in response to the Fed's forecast yesterday of an additional rate hike before the end of the year.

A person looking at the Uber app

Image source: Uber.

So what

The EU is currently negotiating a proposal that would designate gig workers, like Uber drivers, as de facto employees. The news is familiar to Uber and its shareholders: The company has been fighting with jurisdictions since its early days over the classification of its drivers, whom it considers contractors.

In response to the move by the EU, Uber said its prices could go up by as much as 40% in major cities and there would be a 50% to 70% reduction in drivers, which would lead it to stop operating in hundreds of cities in the EU.

Now what

If the EU passes the Platform Work Directive, as the new law is known, it could have a substantial impact on Uber's business. The ride-hailing leader brought in $2.4 billion in revenue in the Europe, Middle East, and Africa (EMEA) region out of $9.2 billion in total revenue last quarter. Presumably, most of its EMEA revenue came from Europe.

Even if the EU doesn't pass the Platform Work Directive, the conflict is a reminder that regulation will continue to be a thorn in Uber's side, adding real costs and threatening to take away business from the transportation stock.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

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