International

Softbank offers to buy Uber at 30 pct discount

Softbank’s offer is close to what Uber was worth in 2015.

SAN FRANCISCO: Japan’s Softbank Group Corp. is offering to purchase shares of Uber Technologies Inc. at a valuation of $48 billion, a 30-percent discount to its most recent valuation of $68.5 billion, a person familiar with the matter said Monday. The investment, which was approved by the Uber board in October, would also trigger a string of governance changes at Uber that would limit some early shareholders’ voting power, expand the board from 11 to 17 directors and cut the influence of former Chief Executive Travis Kalanick.

The investment and board moves are supported by new Chief Executive Dara Khosrowshahi and come at the end of a year of scandals and change for Uber, including the announcement last week that executives covered up a major hack in 2016.

The consortium of investors led by Softbank and Dragoneer Investment Group plan to take a stake of at least 14 percent in the ride-services company. The tender offer will launch Tuesday, sources told Reuters, and investors have nearly a month to respond.

The Softbank-led investor group will acquire two of the new board seats, with the remaining four going to independent directors.

If there are not enough interested sellers, Softbank can still walk away from the deal. Softbank is also expected to make a separate $1 billion investment in the company at the $68.5 billion valuation.

Another person familiar with the deal said the offer price was in line with what investors had been expecting. Softbank’s offer is close to what Uber was worth in 2015, when shares were priced a little less than $40 apiece for a $51 billion valuation, according to data from PitchBook Inc.

Even at the discounted price, Uber is the world’s second-highest valued private venture-backed company, after China’s ride-service company Didi Chuxing, and the offer is a chance for early investors to lock in substantial profits and for employees to cash in shares that have to date only had value on paper. Shareholders, including employees, with at least 10,000 shares are eligible to sell.

Nearly all secondary transactions, when a new investor purchases from existing shareholders, come at a discount to the company’s valuation.

However, the 30 percent discount is steep given Uber’s plan to launch an initial public offering in 2019, said Phil Haslett, co-founder and head of investments at secondary marketplace EquityZen.

Usually valuation cuts of this size happen when a company is at risk of being sold at a heavy discount, which Uber is not.

“It really comes down to a re-pricing of Uber’s value,” Haslett said.

Since it was valued at $68.5 billion more than a year ago, the company has been hit by scandals, including accusations of sexual harassment. It has also weathered federal criminal probes into software Uber used to deceive regulators and allegations of paying bribes to authorities in Asia, and a lawsuit by Alphabet Inc’s self-driving unit Waymo, accusing Uber of stealing trade secrets.

Most recently, Uber revealed that the data of 57 million Uber customers and 600,000 drivers had been stolen in a breach more than a year ago, and that the company had paid two hackers $100,000 to cover it up. Since then, governments across the globe have launched investigations into the incident. The scandal raised questions about whether Softbank would try to renegotiate the deal for better terms.

But Uber said on Friday it had informed Softbank about the data breach prior to informing the public. However, “our information at the time was preliminary and incomplete,” a spokesman said.

A person familiar with the matter said Softbank would have already factored any negative impact from the breach into its negotiations with Uber.

Bloomberg reported the offer price earlier Monday.

 
A version of this article appeared in the print edition of The Daily Star on November 29, 2017, on page 5.

Recommended





Advertisement

Comments

Your feedback is important to us!

We invite all our readers to share with us their views and comments about this article.

Disclaimer: Comments submitted by third parties on this site are the sole responsibility of the individual(s) whose content is submitted. The Daily Star accepts no responsibility for the content of comment(s), including, without limitation, any error, omission or inaccuracy therein. Please note that your email address will NOT appear on the site.

Alert: If you are facing problems with posting comments, please note that you must verify your email with Disqus prior to posting a comment. follow this link to make sure your account meets the requirements. (http://bit.ly/vDisqus)

comments powered by Disqus

Advertisement

FOLLOW THIS ARTICLE

Interested in knowing more about this story?

Click here