3 show interest in Uber shares

Decision by board could have big impact on firm’s leadership

Uber’s board has voted to move forward on proposals by two investment groups to buy shares in the San Francisco ride-hailing service and is considering a third offer, with any decision set to affect who gains the upper hand at the company.

Over the past week, the privately held company’s board voted to take the next step on investment interest from SoftBank, the Japanese conglomerate. It is still considering an offer from a consortium led by Shervin Pishevar, an early investor in the company, to buy Uber shares from an existing investor. The board also earlier voted to go forward with a proposal from a coalition led by the Dragoneer Investment Group to buy stock from Uber’s existing shareholders.

The three proposals were described by four people close to the process, who spoke on the condition of anonymity.

The offers — which are mostly focused on buying Uber stock from current shareholders, rather than issuing new shares —

are preliminary. At this stage, the investment groups will begin a due diligence process that could eventually lead to formal investment terms.

The offers have emerged at a delicate time for Uber, which currently has no CEO and is dealing with board and investor infighting. Travis Kalanick, Uber’s cofounder and CEO, stepped down in June under pressure from investors. Since then, various factions of investors, board members and Kalanick have all battled to advance their own interests.

For some of Uber’s existing shareholders, selling stock now could help lock in a hefty profit at a time when the company’s future is unclear. One of the proposals could also lead to the ouster of one investor whose firm — Benchmark — has an Uber board seat and who some other board members believe is deliberately damaging the company.

One concern has been whether a share sale could end up negatively affecting Uber’s valuation, which stands at $68.5 billion and has made the company the most highly valued private startup in the world.

Two of the three proposals include buying shares at a discount to Uber’s valuation, but also provide a face-saving way for the company to maintain its $68.5 billion value. Dragoneer’s investment coalition wants to buy out shareholders at a discount to Uber’s current valuation, and SoftBank is offering to buy shares at a lower valuation as well. But both groups would also purchase a small amount of new shares at Uber’s current valuation to keep the company’s value propped up on paper.

The group led by Pishevar said it would purchase the shares at the current valuation. Whichever deal ultimately gets approved, this would be the first time that Uber has sold a large chunk of shares at a price that was the same on paper as a previous round of financing.

A spokesman for Uber and a spokeswoman for Uber’s board declined to comment, as did SoftBank, and a spokeswoman for Pishevar. Dragoneer did not respond to a request for comment.

Uber’s board has been wary of the SoftBank proposal because of investments by its founder and CEO Masayoshi Son in Uber’s rivals in Asia. But Son and SoftBank could offer Uber strategic help in Southeast Asia, where the service has been spending heavily. The two sides have quietly worked for weeks to test whether there is enough interest from sellers to make a deal work.

An investor coalition led by Dragoneer, which includes private equity firm General Atlantic, would make the bulk of the investment through buying out existing shareholders at a discount via a Dutch auction — an auction that begins with a high price that declines until a buyer says yes.

Uber’s board voted a little more than a week ago for the Dragoneer deal to move forward.

The deal was complicated by the emergence last week of another investor consortium led by Pishevar. The group made a straightforward offer to buy Uber shares from an existing investor at the company’s $68.5 billion valuation.

But as a condition of the sale, Pishevar wants to buy out 75 percent of the shares held by Benchmark, one of Uber’s earliest and largest investors. That would cause Benchmark to step down from its seat on Uber’s board.

Benchmark’s relationship with Uber has deteriorated in recent months after the San Francisco venture capital firm became one of the key players to push for Kalanick’s resignation as CEO. Last week, Benchmark sued Kalanick to force him off Uber’s board.

In an open letter to Uber employees that was publicly shared Monday on Twitter, Benchmark alleged that Kalanick had forced Benchmark’s hand by undermining the search for a CEO.

Citing Kalanick’s dayto-day involvement with the company (despite his resignation) and what the firm called his failure to make good on a promise to modify Uber’s voting agreement to ensure that “independent, diverse and well-qualified” directors could be appointed, Benchmark said Kalanick had created uncertainty for everyone.

“It has appeared at times as if the search (for a CEO) was being manipulated to deter candidates and create a power vacuum in which Travis could return,” the letter said.

Benchmark said the lawsuit also was intended to hasten the search for a chief financial officer and to bring about cultural change at the company.

On Friday, Pishevar issued a letter to Benchmark demanding that the firm surrender its seat on the Uber board and sell its shares to outside investors. His investment proposal would reduce Benchmark’s stake in the company to the point that it would remove itself from Uber’s board.

In a statement to the Axios news site Monday, Kalanick said he was “disappointed and baffled by Benchmark’s hostile actions, which clearly are not in the best interests of Uber and its employees on whose behalf they claim to be acting” and that he would “work tirelessly” with the board to find a new CEO.

On Twitter last week, Benchmark said that it was “incredibly optimistic about Uber’s future,” and that it believed the company could someday be worth $100 billion. Benchmark also said that Uber would have to have the correct chief executive and be accountable to its riders, drivers and employees before it could be “one of the defining companies of our time.”

The Los Angeles Times contributed to this report.