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Why Uber at $40 billion makes no sense

When Uber was valued at $17 billion, I thought it had potential to live up to that number IF it executed on all cylinders.

Read MoreYoshikami: Why Uber's $17 billion valuation is justified

Admittedly, it took some imagination and optimism, given that the company has no discernible tangible assets except first mover status and an unknown intellectual-capital inventory.

At $40 billion, I simply can't make the numbers work.



The Uber app on a mobile phone
Getty Images
The Uber app on a mobile phone

I suppose in some ways, investors have been tempted into these types of capital assets because of today's low interest-rate environment. One cannot underestimate how the easy money policy of the Federal Reserve has nudged investors to invest in capital assets and more entrepreneurial ventures.

With real estate recovering but still sluggish in most of the country despite a recent bounce back (prices are higher at least partly because of record low interest rates), there are few alternatives for investors.

Read More How Uber's $40 billion could become a problem

I suppose one could invest in a Treasury for 10 years and earn 2 ½ percent, but that¹s pretty unappealing for most. Also, given the frenzy by institutional investors and private equity to tap into the next Facebook, Uber seems like a high profile reasonable opportunity.

Still, there is that stubborn problem of valuation.

Uber continues to run into regulatory issues as they attempt to move into new markets. Portland, Oregon is the latest municipal skirmish with that city threatening to sue the company in order to require Uber to play by the same rules (pay taxes and be subject to governmental regulation) as taxi services. Uber is continuing their aggressive strategy of rolling out services and worrying about regulatory approval after the fact. It¹s hard to see how the company can avoid long-term oversight from municipalities. Big brother might be invasive but they do run the show and Uber is going to have to ultimately figure out a way to not just disrupt but thrive within an oversight climate.

The valuation of this company is clearly based on massive expansion plans. At some point, that expansion will crash up against government regulations and that will negatively impact growth. Of course, valuations have a way of expanding way beyond current business profits based on future beliefs. I¹m all for optimism but, at some point, rational thinking needs to kick it. On a rational basis, even factoring in massive growth opportunities, it¹s hard to see how Uber is a $40 billion company. As I said six months ago — at $17 billion, maybe.

Read MoreUber investors see IPO that would top $100 billion

A prominent Silicon Valley investor who I spoke with this week was equally skeptical about a $40 billion valuation. While he understood clearly that there is a disruptive opportunity for Uber, he was of the belief that the company was valued more on the economic landscape rather than the fundamentals of the company. This futurist believes Uber has opportunities to be a force in the transportation industry, but doubted the valuation as reasonable even factoring in a variety of rosy scenarios.

Other participants will enter the transportation space. Already, some are chipping away at the established taxi-service model and they will no doubt find success in this fragmented industry. Let¹s hope, for Uber¹s sake, that they are able to compete aggressively while at the same time rein in some of their more Wild West tactics in order to maintain their leadership position. The market is counting on it and clearly someone out there believes that there is greater than a $40 billion opportunity in this company.

But for me, the current valuation just doesn't make sense.

Commentary by Michael A. Yoshikami, the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also a CNBC contributor.

Disclosure: Neither Yoshikami nor Destination Wealth Management have any investments in Uber or Facebook.