Uber investors sell at big discount, but still make billions
Ola in India, and several emerging services elsewhere.
During the past year, Uber has been rocked by revelations of rampant sexual harassment in the company, technological trickery designed to hinder regulators, and a yearlong cover-up of a hacking attack that stole personal information of 57 million passengers and 600,000 drivers.
Rohit Kulkarni, managing director of SharesPost, a company that analyses private company investments, says three big events that happened around the time that SoftBank began courting investors combined to discount the shares.
Just before SoftBank’s intent to shop for shares was announced, regulators in London refused to renew the cabhailing app’s license to operate. Then the data hack and cover-up were revealed, and the company told investors its third-quarter net loss had widened to $1.46 billion on huge legal costs. The events helped SoftBank’s group get a better deal, Kulkarni says.
Many big Uber investors include venture capital firms that got in early. They hedged their bets, selling part of their stake to bring big profits to their shareholders while holding the rest for big gains if the company gets past the scandals, the investor said.
“This is still a good deal,” said Gartner analyst Michael Ramsey. “The earlier the investment, the bigger the payout.”
All-in, the SoftBank group will pump about $9 billion into Uber, including $1.25 billion in new shares that were purchased at the 2016 valuation. SoftBank acquired about 15% of Uber, while other investors in its group got around 3%.
SoftBank, which has global investments in other ride-hailing companies, gets two seats on the board and will help Uber navigate the tough global competition, says Kulkarni.
Uber’s new CEO Dara Khosrowshahi and COO Barney Harford are experienced executives who successfully increased share value at travel booking companies, says Kulkarni, who expects Uber to be worth a total of $100 billion by the time it offers shares to the public sometime in 2019.