Uber has op­por­tu­nity from Softbank stock sale

The Pak Banker - - OPINION - Shira Ovide

Uber Tech­nolo­gies Inc. is tak­ing a psy­cho­log­i­cal blow now that a ros­ter of com­pany stock­hold­ers agreed to sell their shares at a steep dis­count. But the stock sale is the right thing to do both for the Uber stock­hold­ers and po­ten­tially for Uber it­self if it takes ad­van­tage of the op­por­tu­nity. Let's not gloss over the bad news, though. Yes, some of Uber's ear­li­est em­ploy­ees and first in­vestors will make a bun­dle by sell­ing shares to SoftBank and other firms that are buy­ing the slug of Uber shares. The stock sale won't work out so well for the com­pany's more re­cent in­vestors.For ex­am­ple, Saudi Ara­bia's gov­ern­ment in­vest­ment fund spent bil­lions of dol­lars to buy Uber shares less than two years ago. The fresh stock pur­chase led by SoftBank val­ues the com­pany at a sig­nif­i­cant dis­count to that im­plied val­u­a­tion of $69 bil­lion, which means the Saudis are now hold­ing a los­ing in­vest­ment. It's a downer for them, and for Uber, to take a big step back in val­u­a­tion.

Even with the short-term pain, the SoftBank stock sale could have far-reach­ing and wel­come rip­ple ef­fects. If the stock sale is fi­nal­ized, Uber's former CEO Travis Kalan­ick will have less sway over the com­pany be­cause his shares will no longer in­clude ex­tra vot­ing power. It's clear Kalan­ick did much harm to Uber -- as well as much good -- and the com­pany is bet­ter off with Kalan­ick tak­ing a di­min­ished role. It's also time to re­visit whether Kalan­ick should stay on Uber's board at all. The big­ger op­por­tu­nity is whether Uber with SoftBank's help can cut back on the profit-drain­ing wars with ri­vals around the world. SoftBank Group Corp. will soon be a backer of many of the top on-de­mand ride com­pa­nies world­wide, in­clud­ing in China, South­east Asia, Brazil and In­dia. It amounts to an all-or-noth­ing gam­ble by SoftBank on the fu­ture of rides on de­mand.It's clear, though, that it will be tough for Uber, In­dia's Ola, 99 in Brazil and other com­peti­tors to be fi­nan­cial win­ners as long as they are slash­ing fares and of­fer­ing driver in­cen­tives to win mar­ket share from one an­other. As a shared in­vestor with a lot at stake, SoftBank may have the power to be­gin to ease those wars. If that sounds like col­lu­sion ... I sup­pose it is. And it won't be great for peo­ple who be­came used to cheap rides.

Uber has al­ready fully re­treated from China and Rus­sia, two mar­kets in which the U.S. startup had stiff com­pe­ti­tion. But while a fur­ther global re­trench­ment might ease Uber's whop­ping losses, it also would raise ques­tions about whether the com­pany can ful­fill its grand­est am­bi­tions. Uber's val­u­a­tion un­til now had been premised on the be­lief that its on-de­mand ride busi­ness would be suc­cess­ful in many pock­ets of the globe.Still, Uber is at a turn­ing point. The com­pany and the trans­porta­tion rev­o­lu­tion it helped spark are ma­tur­ing. That means Uber needs to be­come a real busi­ness, not one that re­lies on in­vestors con­tin­u­ing to fund its losses into per­pe­tu­ity.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.