Gig Economy IPOs

Bruce Burk

Sarasota, FL ( – With the prevalence of the gig economy sweeping across the nation, naturally the companies behind these freelance businesses would eventually seek to be listed on a public stock exchange. Now, we are seeing companies like Uber, Airbnb, Postmates, and Lyft in the process or contemplating going public.

Companies do not go public until they have reached a large degree of success and profitability. The fact that all of these freelance businesses are poised to go public shows just how much the economy is shifting to an on-demand format.

The fact that gig economy companies offer people the opportunity to work flexible hours and to be your own boss is allowing workers opportunities that they did not have even a few years ago.

Another gig economy-based IPO occurred last year with a company called Upwork, which is an online platform where you can hire freelancers for work. The offering resulted in an initial value which was 50 percent above the projected opening price.

The prevalence of these IPOs increases the prominence of these companies and allows them to raise capital to make their businesses grow even more. The bigger they get, the more employees they have to hire.

Yet, their business models are predicated largely on the ability to hire workers as independent contracts, allowing them to not have to pay employee benefits such as workers’ compensation, unemployment, or paid time off.

Recent court cases have made it more difficult to categorize workers as independent contractors in some jurisdictions. Adverse court rulings with respect to this issue could have a significant impact on the share price of these companies when they are listed on the stock exchange.

The rise of freelance work has not been without litigation consequences. Uber, for example, has had to increase background checks and verification measures due to misconduct by some of its workers.

The stock prices of these gig economy-based businesses are also subject to volatility based on probable government regulation. The future is likely to be comprised of a mix of human and artificial intelligence when it comes to labor forces. When you are hiring a freelance worker, should there be laws in place requiring disclosure of how much of the work the individual is actually doing?

Another effect of the rise of these companies is that they stand to take labor away from more traditional markets. Taxi drivers are becoming Uber drivers. Editors that work for newspapers are leaving to start their own freelance businesses. This creates a much more fragmented and smaller labor pool.

Additional case law will be necessary in order to give guidance to lower courts regarding the definition of employees and independent contracts. Many employers try to remedy this conundrum by having their workers sign contractual agreements where the workers essentially agree to abide by the legal requirements for them to be determined an independent contractor. However, many of us in legal circles know that these contracts are not determinative on the issue.

For anyone interested in purchasing stock in these gig-economy based companies, be mindful of the risk posed by new case law and regulation and the impacts that could have on the value of your investment.

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