SoftBank Succeeds in Tender Offer for Large Stake in Uber(wsj.com)
wsj.com
SoftBank Succeeds in Tender Offer for Large Stake in Uber
https://www.wsj.com/articles/softbank-succeeds-in-tender-offer-for-large-stake-in-uber-1514483283?mod=e2twd
142 comments
This. It’s not uncommon to price the common shares differently in tender offers. Facebook did almost the same thing in 2009: DST bought preferred share at $10B valuation and then tender offer at 6.5B [1]
[1] http://kara.allthingsd.com/20090713/facebookers-start-cashin...
[1] http://kara.allthingsd.com/20090713/facebookers-start-cashin...
> It’s not uncommon to price the common shares differently in tender offers
This tender was not restricted to common stockholders. Some preferred stockholders, who bought in recent rounds, sold down or flat. Practically nobody, if not absolutely nobody, who tendered common stock to DST in 2009 lost money on their original investment. The same isn’t true with Uber.
This tender was not restricted to common stockholders. Some preferred stockholders, who bought in recent rounds, sold down or flat. Practically nobody, if not absolutely nobody, who tendered common stock to DST in 2009 lost money on their original investment. The same isn’t true with Uber.
Indeed, they're investing at the 70B valuation and buying existing shares through the tender offer, at a discount.
Given that the latter shares are being sold by existing stockholders, it doesn't seem fair to call this a down round.
I'd expect their valuation to remain the same.
Given that the latter shares are being sold by existing stockholders, it doesn't seem fair to call this a down round.
I'd expect their valuation to remain the same.
If the valuation didn't change, and the common stock is fairly priced, then we should stop calling the valuation $70B. Under that model, Uber was never worth $70B.
No, that's not how that works. The preferred share and common share prices converge towards a liquidity event, like an IPO, when preferred shares are converted to common shares.
It's expected that common shares are worth less than preferred shares. After all, the preferred shares could be paid out at value in, e.g. in the event that the company is sold for far less than the current valuation, and the common shares would be worthless.
It's expected that common shares are worth less than preferred shares. After all, the preferred shares could be paid out at value in, e.g. in the event that the company is sold for far less than the current valuation, and the common shares would be worthless.
Common stock is worth less than preferred. Most stock is not preferred. Therefore there was never $70B worth of Uber stock in existence.
Your argument has obvious merit, but the standard is to report on the preferred price, not the common price.
It's a de facto standard because markets for common stock generally don't exist for private companies. If you're comparing Uber against AirBnb it makes sense to compare valuations based on preferred stock, if you're comparing them to anything in "the real economy" or are interested in the value someone has placed on the company as a whole it's less clear which number is more useful.
> markets for common stock generally don't exist for private companies
There is a thriving, if shallow, secondary market for the private stock, common or preferred, of companies like Uber.
There is a thriving, if shallow, secondary market for the private stock, common or preferred, of companies like Uber.
Agreed that the press does go around using this $70B number as a valuation. If the company IPO'd at less than $70B it would similarly be reported as a dud. Recruiters also use the $70B when offering stock options. And I'm sure it feels like a haircut to those employees who just sold their stock at a $49B valuation.
> I'm sure it feels like a haircut to those employees who just sold their stock at a $49B valuation.
Probably not. The strike is likely at a much larger discount.
Probably not. The strike is likely at a much larger discount.
All of the employees who sold in this tender offer have options, which have a maximum strike of less than $20 per share for common stock. Only RSUs were issued after early 2015. Uber’s valuation was $40B then.
I've only got two IPOs under my belt, but both cases the 1st trade settled above the preferred price in the last round. I think that's fairly typical, fwiw.
Having the stock after IPO trade at the old preferred price represents a significant increase of the actual value of the company, even though it's not usually reported as such.
i agree with you, but its the way that private company valuations work in the valley. If you read an article that says company X raised a round at Y valuation, its always based on the preferred price.
The number of times this exact mistake is made on headlines about Uber makes me wonder if it isn't being made maliciously.
> Feels a little clickbait-y to say the valuation took a haircut when we're talking about different classes of stock
An investor from March 2016 Series G would have sold, to SoftBank, at a lower price per share than that at which they invested. That’s a haircut.
Pricing for preferred versus common, or even different classes of preferred, does diverge. The degree to which it does reflects proximity to liquidation, amongst other factors. A 30% discount for a late stage company between any two stages of preferred is not healthy nor common (no pun intended).
Not sure why every time a story about people selling Uber stock for less than they bought it this naïve financial interpretation comes out in droves.
An investor from March 2016 Series G would have sold, to SoftBank, at a lower price per share than that at which they invested. That’s a haircut.
Pricing for preferred versus common, or even different classes of preferred, does diverge. The degree to which it does reflects proximity to liquidation, amongst other factors. A 30% discount for a late stage company between any two stages of preferred is not healthy nor common (no pun intended).
Not sure why every time a story about people selling Uber stock for less than they bought it this naïve financial interpretation comes out in droves.
also there is limited liquidity and limited secondary activity so it is either sell at $49 billion or wait for an IPO, Softbank has all the leverage, why on earth wouldn't they try to lowball investors who were going to sell and had no other options
A few observations:
Softbank has stakes in Didi, Didi has stakes in Uber, Uber has stakes in Didi, with this Softbank got stakes in Uber.
Uber is mostly successful in North America and Southern Americas. Didi is obviously successful in China and will expand to Southern Americas soon.
Europe is not an important market for these companies. Too much regulations and good public transportation won't allow them to thrive.
Softbank probably wants Uber to be limited to North America and have its companies like 99 and Ola compete with Uber in their markets.
If Uber is limited to US and Canada and a few small markets here and there, then it makes sense to see its valuation go down like this.
Softbank is competing with Uber in a global scale using a network of companies it invested in, including Uber!
Softbank has stakes in Didi, Didi has stakes in Uber, Uber has stakes in Didi, with this Softbank got stakes in Uber.
Uber is mostly successful in North America and Southern Americas. Didi is obviously successful in China and will expand to Southern Americas soon.
Europe is not an important market for these companies. Too much regulations and good public transportation won't allow them to thrive.
Softbank probably wants Uber to be limited to North America and have its companies like 99 and Ola compete with Uber in their markets.
If Uber is limited to US and Canada and a few small markets here and there, then it makes sense to see its valuation go down like this.
Softbank is competing with Uber in a global scale using a network of companies it invested in, including Uber!
This seems kinda odd, because one of the main plus points for me is that Uber worked somewhat internationally. I use Lyft only, but that was a key differentiator for me actually.
As a more interesting question, is there any difference between saying SoftBank is competing with Uber and that SoftBank has hedged against an Uber investment? I feel like the latter may be more the framing of these investments.
As a more interesting question, is there any difference between saying SoftBank is competing with Uber and that SoftBank has hedged against an Uber investment? I feel like the latter may be more the framing of these investments.
Same here. In the States I mostly use Lyft, but internationally it's easier to just use the Uber app instead of first figuring out which other options are available. In many cases installing the local apps doesn't even work because they are limited to their own local app stores.
One of the next steps for those companies is probably to get roaming agreements with each other: When I'm in a country where, e.g., Uber doesn't operate I'd still like to be able to use the Uber app to order cars from whatever local companies Uber has an agreement with.
One of the next steps for those companies is probably to get roaming agreements with each other: When I'm in a country where, e.g., Uber doesn't operate I'd still like to be able to use the Uber app to order cars from whatever local companies Uber has an agreement with.
The problem with Uber/Didi in China is that the driver will Always call to discuss your pickup location in Mandarin, which can be difficult enough face-face.
The further complication is that Didi only accepts patent through a China bank account. As a result, you usually need a local friend to book your ride, even if you pay cash.
The further complication is that Didi only accepts patent through a China bank account. As a result, you usually need a local friend to book your ride, even if you pay cash.
Didi has been accepting payment via credit card for at least a few months now. It can be a pain to set up and doesn't always work but at least it's possible now.
Cologne is the fourth largest city in Germany. Was surprising that Uber didn't work there.
Uber "seems" everywhere, but is largely North American.
Uber "seems" everywhere, but is largely North American.
North America is their largest market, but they still have more cities outside it than inside: https://www.uber.com/cities/
Uber is prohibited from operating in Germany like they do elsewhere. So Uber stopped operating in Germany.
This was because Uber did not provide adequate insurance for rides and did not comply with German transportation law.
This was because Uber did not provide adequate insurance for rides and did not comply with German transportation law.
Incorrect, Uber is in more cities outside of North America than within it.
The success of Didi in China has been interesting. They have largely co-opted the taxi pools in Beijing/Shanghai/Shenzhen by allowing you to bid/pay the driver to pick up riders. It has changed dramatically in only a few years.
Although locals tell me it is illegal you can wait over an hour and a hundred green-lit taxis before one will stop to pick-up someone without an app that is willing to bid a few yuan. Train stations and airports have cues where you can still get a ride, but don't count on hailing a car in the evening even in a busy downtown district.
As a result they control all of the taxi business and all of the ride-shares. I must say not having to transact in cash is nice.
Although locals tell me it is illegal you can wait over an hour and a hundred green-lit taxis before one will stop to pick-up someone without an app that is willing to bid a few yuan. Train stations and airports have cues where you can still get a ride, but don't count on hailing a car in the evening even in a busy downtown district.
As a result they control all of the taxi business and all of the ride-shares. I must say not having to transact in cash is nice.
This highlights why many governments dislike ride hailing services.
As riding hailing becomes dominant (with their rise only being enabled by being able to skirt regulations) it creates a transportation system where one needs a mobile phone to participate. This excludes low income persons and persons with low technical literacy.
The way that ride hailing slices away only part of the population and ignores the rest is highly undesirable for governments which are required to provide transportation solutions for all persons.
As riding hailing becomes dominant (with their rise only being enabled by being able to skirt regulations) it creates a transportation system where one needs a mobile phone to participate. This excludes low income persons and persons with low technical literacy.
The way that ride hailing slices away only part of the population and ignores the rest is highly undesirable for governments which are required to provide transportation solutions for all persons.
In my city low income people are technologically literate enough to have smartphones.
The poor are excluded from traditional taxis as well, whereas at least ride-hailing can pool people together to lower prices. In the future we might see larger van formats operating like buses with ad-hoc routing.
I personally favor subsidized public transit options, and don't think ride hailing apps discourage that any more than taxis. If anything, ride hailing apps help transition people away from car ownership and into mixed use transit.
In the extreme situation that these services somehow killed traditional public transit, we'd figure it out. This is not a hard problem to solve. Imagine an iPad inside a bus stop.
This makes sense. I don't think Uber would survive without scaling down its ambitions. Sooner or later, they have to exit unprofitable cities and leave those markets for smaller players. Uber isn't in the same league of business as Google is. It can't scale without bringing range of issues while profitability still remaining out of sight.
If that holds true, Softbank has managed to have a stake in every major app-based-taxi company of the future.
If that holds true, Softbank has managed to have a stake in every major app-based-taxi company of the future.
But Uber isn’t limited to the USA and Canada. At least, not like how Didi is limited to china:
https://www.uber.com/country-list/
https://en.m.wikipedia.org/wiki/Uber_(company)#Legal_status_...
https://www.uber.com/country-list/
https://en.m.wikipedia.org/wiki/Uber_(company)#Legal_status_...
Yes, but scale of countries like Bahrain doesn't make a dent. Also, in each of those countries Uber has a competition that is usually more successful than Uber. That's not true in Brazil and Mexico and that's why Didi is rushing there!
Uber has around 50% market share in India. That alone is the third biggest market in the future.
Uber's main competitor in India is OLA cabs.
India is ripe for Ride sharing cabs. In major metros, OLA (specifically OLA Select) is the ride of choice for middle class youth. With free wifi and one hour work commutes common, the ola ride becomes time to get emails and secretarial work taken care of.
India is ripe for Ride sharing cabs. In major metros, OLA (specifically OLA Select) is the ride of choice for middle class youth. With free wifi and one hour work commutes common, the ola ride becomes time to get emails and secretarial work taken care of.
As some one living in one of those metros. I have never used Ola. They always seem to have less cabs.
Didi isn’t in South, Central, or North America yet, so talking about how successful they are doing there isn’t very meaningful. Didi will also face competition in those countries as well when and if they decide to enter those markets, not to mention they’ll have to aggressively rebrand (even their name might have to change).
In my experience, the Didi app is inferior to Uber's. Not sure how they would manage to outcompete.
Price is the by far the biggest factor. My friends (here in Brazil) have two or three apps installed and always compare price before making a choice.
It might not be a fair comparison since didi never had an English interface.
They have an English UI now :)
IMHO - Brazil and Mexico are dominated by Cabify and EasyTaxi.
Uber is strong here too.
Uber's relative failure in the highly deregulated Swedish taxi market to me indicates that their competitive advantage is avoiding regulations. So it's not clear why "to much regulations" would be a problem for them.
Failure ? I remember taking Uber everywhere in Stockholm
Europe has Taxify that has Chinese investors as well.
It's the same Chinese company Didi (https://techcrunch.com/2017/08/01/chinas-didi-invests-in-tax...).
Over-here in Romania Uber is also scoring it big in cities like Bucharest or Cluj, almost all of the middle-class people between 20 and 40 years of age now use it, they've almost all stopped taking taxis (seen as too dirty). I'm one of the few exceptions in my circle of friends (I'm in my late 30s) who still uses taxis taken directly off the street or by actually calling a phone number, because I don't want another company tracking my every move (it's enough that Apple and most probably Google are doing it).
Over-here in Romania Uber is also scoring it big in cities like Bucharest or Cluj, almost all of the middle-class people between 20 and 40 years of age now use it, they've almost all stopped taking taxis (seen as too dirty). I'm one of the few exceptions in my circle of friends (I'm in my late 30s) who still uses taxis taken directly off the street or by actually calling a phone number, because I don't want another company tracking my every move (it's enough that Apple and most probably Google are doing it).
> If Uber is limited to US and Canada
I fervently hope it's the US only. I will talk to my MLA and show him a nice collection of news about Uber in hope they will not allow them to operate their scam in Vancouver.
I fervently hope it's the US only. I will talk to my MLA and show him a nice collection of news about Uber in hope they will not allow them to operate their scam in Vancouver.
How is it a scam? It gave me a ride to the airport for $26 bucks. I took a cab once and it cost over $50 bucks. My need some tweaks here and therem but overall its a great service for customers
The missing $24 were health insurance, car insurance, pension payments for the driver etc. All not being paid.
Uber is no ride share service, it is a test project to figure out if modern society will accept a larger lower income working class without any social security, and that is what all investment firms bet on.
Uber is no ride share service, it is a test project to figure out if modern society will accept a larger lower income working class without any social security, and that is what all investment firms bet on.
> The missing $24 were health insurance, car insurance, pension payments for the driver etc.
Car insurance, maybe; car companies don't pay health insurance or pensions either for their drivers, who are also characterized as contractors rather than employees.
Car insurance, maybe; car companies don't pay health insurance or pensions either for their drivers, who are also characterized as contractors rather than employees.
Nope, they are employees
http://www.bbc.co.uk/news/business-37802386
Still waiting on the Inland Revenue to collect all that back NI tho’...
http://www.bbc.co.uk/news/business-37802386
Still waiting on the Inland Revenue to collect all that back NI tho’...
Most of them do some driving on the side to supplement their income.
That depends on the country. In Europe transportation is regulated, and fees are higher and also arrive at the drivers, since they actually have pensions etc.
Meaning Uber eliminates basically the most prominent achievement of the working class with its service. Turning everyone into an independent contractor eliminates social security. Swiftly.
Meaning Uber eliminates basically the most prominent achievement of the working class with its service. Turning everyone into an independent contractor eliminates social security. Swiftly.
The driver uses that money to pay for his own health insurance and retirement. Contrary to your post, Uber provided me with commercial vehicle insurance when I was driving for them.
That is the problem here. Employed work means sharing the duties of social security between company and employee. Uber moves their payments on your shoulders.
And that point is exactly what makes up Ubers' valuation. Ignoring the questionable ethics of that this should be reconsidered though because comparing to the technical value of their service they are requiring way too many engineers to deliver their services, which is a considerable risk if they grow any further.
And that point is exactly what makes up Ubers' valuation. Ignoring the questionable ethics of that this should be reconsidered though because comparing to the technical value of their service they are requiring way too many engineers to deliver their services, which is a considerable risk if they grow any further.
There is no duty for a company to provide social security for contractors. Same way as an Uber contractor has no responsibility to drive a certain amount of time or at certain hours.
Additionally taxis are regulated so as to create a reasonably universally publicly accessible transportation system. That is that you can call a cab and it will pick you up and you will have an understanding of the price you will pay.
In an Uber/Lyft ride hailing system cabs can only be hailed via an app, and will only accept the most profitable rides. Surge pricing may also make the ride only affordable to the relatively wealthy. In such a system, low income persons in relatively remote areas lose transportation options.
Part of the extra price of cabs is the price of creating a transportation system that is accessible to everyone, not just the most wealthy.
In an Uber/Lyft ride hailing system cabs can only be hailed via an app, and will only accept the most profitable rides. Surge pricing may also make the ride only affordable to the relatively wealthy. In such a system, low income persons in relatively remote areas lose transportation options.
Part of the extra price of cabs is the price of creating a transportation system that is accessible to everyone, not just the most wealthy.
Uber and Lyft actually succeeded in creating an accessible system that everyone could afford. You have it all backwards. The common person can actually afford Uber, not cabs.
Many elderly people are no longer able to drive and aren't technically comfortable with using mobile phones.
App based ride hailing dominance reduces accessibility.
App based ride hailing dominance reduces accessibility.
A button that calls you an Uber is as easy to build as a button that calls the taxi dispatcher for you, but I don’t think the elderly appreciate the taxi experience of demanding cash because they’re pretending the card reader broke.
(You can already get a voice assistant to book a ride for you too.)
(You can already get a voice assistant to book a ride for you too.)
Ask your grandma etc if they would use that. Anyone above 50 these days will probably not give you a nice answer to having to use smartphones or voice assistants that usually understand less than a newborn child.
As someone around that age get off your virtue signaling high horse. People in their fifties today helped build most of the tech you use every day, but even if they hadn’t your implicit ageism levied in service of an accessibility rant is a level of irony that just can’t be ignored.
Considering my own age, it might happen that I just mentioned this because I am rather close to that generation myself.
I seriously doubt people will be comfortable with this stuff unless they have a history with engineering/IT.
I seriously doubt people will be comfortable with this stuff unless they have a history with engineering/IT.
We've banned this account for repeatedly violating the HN guidelines.
You've never met a newborn child.
No, it doesn’t.
See we can both play the no proof game.
See we can both play the no proof game.
> That is that you can call a cab and it will pick you up and you will have an understanding of the price you will pay.
LOL you must never have taken a cab ride pre-Uber. Your two assertions are the two main reasons why Uber and Lyft exist.
> In an Uber/Lyft ride hailing system cabs can only be hailed via an app, and will only accept the most profitable rides.
You don't know how the Uber app works.
LOL you must never have taken a cab ride pre-Uber. Your two assertions are the two main reasons why Uber and Lyft exist.
> In an Uber/Lyft ride hailing system cabs can only be hailed via an app, and will only accept the most profitable rides.
You don't know how the Uber app works.
Lol, where I live, the idea of finding any cab, even if you knew the cab company and called them, was laughable. Uber at least will come, and will give you an estimate beforehand.
> You don't know how the Uber app works.
So Uber drivers are not able to decline a ride request?
So Uber drivers are not able to decline a ride request?
No, not the way that you're describing. They have no way to "accept only the most profitable rides". This is patently false.
Ok yeah I see what you mean.
The fear that I've heard described by politicians in my city is that uber drivers could position themselves in areas where they know from experience they will be most profitable (eg. dense downtown core) while avoiding areas that over time are not as profitable (eg. sparse outer areas). This fact, coupled with the fact that they are not obligated to travel to a certain area to receive a fare, means that certain areas could receive less reliable service as drivers chase high profit areas and are able to ignore others.
The fear that I've heard described by politicians in my city is that uber drivers could position themselves in areas where they know from experience they will be most profitable (eg. dense downtown core) while avoiding areas that over time are not as profitable (eg. sparse outer areas). This fact, coupled with the fact that they are not obligated to travel to a certain area to receive a fare, means that certain areas could receive less reliable service as drivers chase high profit areas and are able to ignore others.
Your politicians are lying to you because they are paid off by the taxi monopoly. Service everywhere increases because of Uber and Lyft. The behavior you describe is exactly what taxis do. If you look at how things improved in all cities, service improved by orders of magnitude. In NYC, service to all 5 boroughs improved dramatically because of Uber and Lyft, because taxis would only service manhattan.
Before you follow blindly what your politicians are telling you, do some research and educate yourself first. Don’t rely on headlines and word of mouth.
Before you follow blindly what your politicians are telling you, do some research and educate yourself first. Don’t rely on headlines and word of mouth.
If there is demand and lack of supply in an area then it will surge.
How can that be true when Uber is cheaper than taxis?
Uber drivers aren't obligated to accept hail requests.
As Uber gains dominance over regulated taxis (which are obligated to serve everyone), the level of accessibility to transportation in certain generally unprofitable areas may decrease.
As Uber gains dominance over regulated taxis (which are obligated to serve everyone), the level of accessibility to transportation in certain generally unprofitable areas may decrease.
The rates Uber charges are unsustainable, funded with VC money and underpaying drivers, hence posters comment that Uber is a scam.
Uber’s play is to wait out taxis going out of business and then charge you $50.
Uber’s play is to wait out taxis going out of business and then charge you $50.
Because they think no one else can write apps..? Kalanick may be an asshole, but I don't think he's stupid.
The difference, the $24, comes out of driver's pockets.
And also, Uber loses money on every ride. That $26 ride to the airport cost Uber $30. :)
And also, Uber loses money on every ride. That $26 ride to the airport cost Uber $30. :)
Is Uber a scam, or is ride share, in your opinion?
Ride share is a great servicce for people and increases safety in many areas.
Ride share is a great servicce for people and increases safety in many areas.
Uber is (in my opinion) a scam, and (objectively) not ride sharing.
'Ride sharing' does not even begin to describe Uber. There is no sharing going on whatsoever. It's a taxi company that just ignores the law on principle to gain an advantage, while also spending VC money like crazy in a very illegally anticompetitive manner.
'Ride sharing' does not even begin to describe Uber. There is no sharing going on whatsoever. It's a taxi company that just ignores the law on principle to gain an advantage, while also spending VC money like crazy in a very illegally anticompetitive manner.
I don't see the VC money and avoiding regulation to be essential parts of the business though. I very rarely take a cab, and am not price sensitive. I tried Lyft, albeit not Uber, and like people repeatedly say, the good things about it are (a) you get fast response and a direct way to contact the driver, (b) you see how close they are to you on a moving map, (c) you get an up front estimate, and (d) they don't demand cash. While it might slow them down if they weren't subsidizing drivers, or drivers weren't subsidizing them, it wouldn't change the fact that the things they do are actually worth more than a regular cab, so they could charge more and not less, as far as I'm concerned.
If Uber and Lyft are "just taxi companies" then why don't all the other taxi companies just make a similar app and then promote the idea their upstart competitors are regulation-avoiding scum? It ought to be more effective than ignoring why people use them.
If Uber and Lyft are "just taxi companies" then why don't all the other taxi companies just make a similar app and then promote the idea their upstart competitors are regulation-avoiding scum? It ought to be more effective than ignoring why people use them.
I feel like this is another "Sprint" acquisition in the making for Masayoshi. Uber like Sprint has
- undefensible core business model
- overvalued market cap
- assumes capital markets will hold
https://www.forbes.com/sites/abrambrown/2013/07/30/sprints-p...
To me, he's a risk-taker for the sake of taking risks. He has to be perceived to be taking risks in the Japanese circles for some reason, but might be a billionaire ego. While there were good picks like Alibaba, these capital intensive acquisitions seems counter productive and during completely different environments (early 2000s).
I don't mean to criticize Son Masayoshi for all he is, after all, he did overcome poverty and a systematically racist Japanese society that severely limited the economic activities of non-Japanese, purely based on blood. I just feel like most of his North American acquisitions haven't turned out great.
- undefensible core business model
- overvalued market cap
- assumes capital markets will hold
https://www.forbes.com/sites/abrambrown/2013/07/30/sprints-p...
To me, he's a risk-taker for the sake of taking risks. He has to be perceived to be taking risks in the Japanese circles for some reason, but might be a billionaire ego. While there were good picks like Alibaba, these capital intensive acquisitions seems counter productive and during completely different environments (early 2000s).
I don't mean to criticize Son Masayoshi for all he is, after all, he did overcome poverty and a systematically racist Japanese society that severely limited the economic activities of non-Japanese, purely based on blood. I just feel like most of his North American acquisitions haven't turned out great.
Still a heck of a return for early investors:
> Seed investors in Uber who sell to SoftBank will make a ~3600x return. $1.6 million round in 2010 would now be worth $5.7 billion at offer price.
https://twitter.com/alfredjlee/status/946443457039540225
> Seed investors in Uber who sell to SoftBank will make a ~3600x return. $1.6 million round in 2010 would now be worth $5.7 billion at offer price.
https://twitter.com/alfredjlee/status/946443457039540225
Should have invested in bitcoin instead! ;)
[deleted]
This is why there’s a unicorn obsession.
In Japan, company struggles are first blamed on the management chain. Not the employees, not bad luck. The people in charge. If new management can’t sort things out then it must be they workers.
This also appear to apply to subsidiaries in other countries. Given the way Uber has been going, next year is going to get interesting. Given Uber’s struggles, if SoftBank follows the playbook, they won’t touch anything for a full fiscal year. If things don’t improve, expect to see multiple executive heads roll in the second fiscal year, all on the same day. In the third if profits haven’t improved, expect a layoff of regular employees to make the numbers work.
After that, depending on how aggressive they have to get, there could be a whole other set of reasons not to want to work at Uber...
This also appear to apply to subsidiaries in other countries. Given the way Uber has been going, next year is going to get interesting. Given Uber’s struggles, if SoftBank follows the playbook, they won’t touch anything for a full fiscal year. If things don’t improve, expect to see multiple executive heads roll in the second fiscal year, all on the same day. In the third if profits haven’t improved, expect a layoff of regular employees to make the numbers work.
After that, depending on how aggressive they have to get, there could be a whole other set of reasons not to want to work at Uber...
SoftBank has a minority, 15% stake. Will they really have enough authority and juice with the other board members to execute a boardroom coup?
Yeah I thought this was meant to be a bigger stake after the rumors and the title. 15% is a large stake now, WSJ?
However as someone else pointed out SoftBank has ties to some of the other investors, so who knows what the board room will look like.
However as someone else pointed out SoftBank has ties to some of the other investors, so who knows what the board room will look like.
15% is a HUGE stake... Even Kalanick has <10%
They will if 35% of shareholders agree with them.
> Other members of SoftBank’s bidding group are likely to buy part of the remaining shares on offer, the people said.
Any ideas on who are these other members?
As for the question on whether this is a haircut on valuation is an interesting one.
This is not exactly raising money from a VC rather through a secondary offering, so Uber can still claim there is no down round. It's just that people in public bidding sold on a discount. But, that is fine too as common stock from early rounds are actually worth less than common stock from later rounds.
https://www.bloomberg.com/view/articles/2017-11-16/softbank-...
> Since Uber's stock doesn't trade on an exchange, there is no public record of its value changing from day to day, and it can point to its last fundraising round as its still-current "official" valuation, whatever has happened since. But if it does a new round at a lower price, it won't be able to play that game any more. And as Uber gets closer to an initial public offering, that game becomes more important: It's harder to argue for an $80 billion IPO after a $50 billion private down-round.
Any ideas on who are these other members?
As for the question on whether this is a haircut on valuation is an interesting one.
This is not exactly raising money from a VC rather through a secondary offering, so Uber can still claim there is no down round. It's just that people in public bidding sold on a discount. But, that is fine too as common stock from early rounds are actually worth less than common stock from later rounds.
https://www.bloomberg.com/view/articles/2017-11-16/softbank-...
> Since Uber's stock doesn't trade on an exchange, there is no public record of its value changing from day to day, and it can point to its last fundraising round as its still-current "official" valuation, whatever has happened since. But if it does a new round at a lower price, it won't be able to play that game any more. And as Uber gets closer to an initial public offering, that game becomes more important: It's harder to argue for an $80 billion IPO after a $50 billion private down-round.
If you can't read this article but you have a Facebook account then you can create this as a bookmarklet:
javascript:window.location.href='https://m.facebook.com/l.php?u='+encodeURIComponent(window.location.href);
outline.com makes this process a lot easier. Go there, paste link, read.
https://outline.com/S9t4AN
https://outline.com/S9t4AN
I have to have Facebook to access the web.
Net neutrality.
Net neutrality.
This has nothing to do with net neutrality, it has to do with the WSJ’s monetization model.and the fact that they selectively bypass it for Facebook as a promotional strategy.
Clicked the link. Didn't get content. Get a [Subscribe] button. Click it to choose internet package monthly fee.
It's the exact nightmare scenario Net Neutrality supporters warned us about. Packaged internet. No more free access.
It's the exact nightmare scenario Net Neutrality supporters warned us about. Packaged internet. No more free access.
How often do companies come back from down rounds?
It seems like any company willing to take a down round is also fine with taking a publicity hit and a hit to morale, which suggests it's in an even worse spot compared to what the devaluation would suggest.
Is there precedent that suggests even that SoftBank will come out on top from this?
It seems like any company willing to take a down round is also fine with taking a publicity hit and a hit to morale, which suggests it's in an even worse spot compared to what the devaluation would suggest.
Is there precedent that suggests even that SoftBank will come out on top from this?
Maybe I’m alone but my initial reaction was: “oh 30% doesn’t sound that bad”.
It's really bad for anybody who has options. The last time Uber's valuation was this low was 2 1/2 years ago. I don't know how Uber did employee equity, but if it was options with a valuation based on the numbers we're seeing in public, then somebody who joined 2 years ago would just have had their equity stake drop to $0. And in some sense it's negative, in that even if the valuation goes up modestly, their stake is still worthless. After putting up with all the internal bullshit and the bad press, that'd be quite a kick in the gut.
If that's what Uber is doing internally, then in practice I imagine they're going to have to give out a lot more options to keep everybody happy.
If that's what Uber is doing internally, then in practice I imagine they're going to have to give out a lot more options to keep everybody happy.
> if it was options with a valuation based on the numbers we're seeing in public.
It's not. Public numbers are based on preferred shares. Options are common.
It's not. Public numbers are based on preferred shares. Options are common.
Uber has been making offers in RSUs for more than 2 years:
https://www.reddit.com/r/cscareerquestions/comments/3u5asj/u...
Ah, good point. Here's confirmation of that from the NYT: https://www.nytimes.com/2017/03/03/technology/uber-said-to-c...
For the people who have options, some could still be entirely wiped out by this, but it's not as big a problem for new hires.
It's still a problem, though. As the Reddit discussion makes clear, people are benchmarking against things like Google. The equivalent equity package from Google 2 years ago would have gained 30% in value, while the Uber one has lost 30%. Assuming $200k in equity from each place, that's $260k for Google and $140k for Uber, or nearly a 2x difference.
That would sure make me think about jumping ship.
For the people who have options, some could still be entirely wiped out by this, but it's not as big a problem for new hires.
It's still a problem, though. As the Reddit discussion makes clear, people are benchmarking against things like Google. The equivalent equity package from Google 2 years ago would have gained 30% in value, while the Uber one has lost 30%. Assuming $200k in equity from each place, that's $260k for Google and $140k for Uber, or nearly a 2x difference.
That would sure make me think about jumping ship.
Uber was handing out 4x in fictional equity back then compared to Google's real RSUs.
In early stages it's relatively rare (or, perhaps more bad). When you're the size of Uber a downround isn't a necessarily uncommon thing, and it's very unlikely to be a company killer.
As someone pointed out above, this deal seems to be modeled after DST’s 2009 tender offer for Facebook shares - they paid a 35% discount for common shares from employees and early investors. DST cashed out in the IPO making a return of around ~18x.
If you want a forecast of how ridesharing companies will settle out, tear the route map out of an inflight magazine. There is no global airline, but many regional airlines that provide international connectivity to other regional airlines.
It makes sense that each major region will have 2 or 3 dominant operators including local taxis. In the long term, a local operator will have advantages due to better local knowledge, government relations, etc.
Roaming agreements will take the equivalent of Star Alliance, and primarily of value for international travelers. Most users will interact with their preferred local operator. Note this has been tried already, but failed due to parties not trusting each other, but will probably be tried again once territories are more nailed down.
It makes sense that each major region will have 2 or 3 dominant operators including local taxis. In the long term, a local operator will have advantages due to better local knowledge, government relations, etc.
Roaming agreements will take the equivalent of Star Alliance, and primarily of value for international travelers. Most users will interact with their preferred local operator. Note this has been tried already, but failed due to parties not trusting each other, but will probably be tried again once territories are more nailed down.
Does the cost in maintaining/paying for hub airports factor into why airlines are regional? For example southwest has service over most of the US because they use the older/cheaper airports vs United has hubs that don't heavily overlap with American. I don't see the parallel with ride sharing here.
I think Uber/Lyft can take over the whole US since they don't need to maintain much supporting infrastructure. Plus they can get economy of scale in marketing.
I think Uber/Lyft can take over the whole US since they don't need to maintain much supporting infrastructure. Plus they can get economy of scale in marketing.
What's the purpose of this $1B investment at a $70B fictional valuation given that everyone knows the actual valuation is $48B? Does it make the tax accounting better for someone somehow?
I'm with discordianfish in saying only 30% down sounds better than it could have been for Uber.
I'm with discordianfish in saying only 30% down sounds better than it could have been for Uber.
The 1B at 70B valuation is preferred stock.
The question is why you would quote that number if preferred stock isn't 100% of the capital structure.
I am not sure if this will be their most lucrative investment of all times.
There is a great analysis of Uber's failed business model by Hubert Horan [1]
[1] http://horanaviation.com/Uber.html
[1] http://horanaviation.com/Uber.html
so you mean the whole rider sharing is scam? lol
Can we please not post websites that require a paid subscription?
I wonder how this liquidation opportunity will be doled out to common stock holders. Proportionally? FIFO?
Does anyone really think that Uber has enough runway, or could ever get enough, to last until the necessary level of automation is developed? SoftBank though, between this and their incredibly favorable, conditional loan to Theranos really has an eye for distressed assets!
If someone does have a vision for a successful Uber, I’d love to hear it, not to try and pick it apart, just to understand what’s happening.
If someone does have a vision for a successful Uber, I’d love to hear it, not to try and pick it apart, just to understand what’s happening.
Uber should easily be profitable without driverless cars. Uber's cost to book rides is pennies, its share of ride revenues is dollars. It's likely profitable or close in north america now.
The naked capitalism analysis was childishly biased, completely done without access to the necessary detail of their financials. Uber under Kalanick poured massive amounts of money into accelerating international market expansion as well as a huge number of side projects of questionable value.
Uber just exited the car leasing business. Yes, Kalanick had Uber leasing cars to drivers, and losing big money doing it. How much has it poured into Uber Eats? How much did it pour into driverless car tech when it will be easily available whenever it becomes good enough for regulators to allow it? Besides the cost, how big a distraction to running the actual business of offering car sharing services were these hundred other endeavors?
The new CEO just has to trim out almost all of the side businesses, and put the focus on finding more cost effective ways to grow Uber's car sharing services world wide. Part of that is not pissing on your own brand by doing sleazy things. In the end, if they remain the world wide leader in car sharing service, installed on the most mobile devices, with the biggest pool of drivers and customers, they'll be very profitable. and making the transition to driverless cars will be easier for them than anyone else because they'll have the biggest brand and customer base.
The naked capitalism analysis was childishly biased, completely done without access to the necessary detail of their financials. Uber under Kalanick poured massive amounts of money into accelerating international market expansion as well as a huge number of side projects of questionable value.
Uber just exited the car leasing business. Yes, Kalanick had Uber leasing cars to drivers, and losing big money doing it. How much has it poured into Uber Eats? How much did it pour into driverless car tech when it will be easily available whenever it becomes good enough for regulators to allow it? Besides the cost, how big a distraction to running the actual business of offering car sharing services were these hundred other endeavors?
The new CEO just has to trim out almost all of the side businesses, and put the focus on finding more cost effective ways to grow Uber's car sharing services world wide. Part of that is not pissing on your own brand by doing sleazy things. In the end, if they remain the world wide leader in car sharing service, installed on the most mobile devices, with the biggest pool of drivers and customers, they'll be very profitable. and making the transition to driverless cars will be easier for them than anyone else because they'll have the biggest brand and customer base.
Even if they pull all of that off, which I'm suspicious of, I don't see what justifies the valuation.
The only way it made sense to me is if Uber achieved the same sort of dominance that Google has in search or Facebook in social networking. But Uber's market share is declining [1], and I just don't see a moat that allows them to be able to extract monopoly/monopsony rents.
Just the other day a friend caught an Uber in a strange city. The driver, who drove for multiple providers, encouraged her to use Lyft instead. And Lyft is hardly the only competitor; starting a pseudo-taxi provider is just not hard. So I think Uber won't be profitable for long even in the driverful car market. And when driverless cars come along, the amount of possible well-funded competitors (BMW, GM, Ford, Virgin, Enterprise, Google, etc, etc) means it's unlikely to get better.
[1] https://www.recode.net/2017/8/31/16227670/uber-lyft-market-s...
The only way it made sense to me is if Uber achieved the same sort of dominance that Google has in search or Facebook in social networking. But Uber's market share is declining [1], and I just don't see a moat that allows them to be able to extract monopoly/monopsony rents.
Just the other day a friend caught an Uber in a strange city. The driver, who drove for multiple providers, encouraged her to use Lyft instead. And Lyft is hardly the only competitor; starting a pseudo-taxi provider is just not hard. So I think Uber won't be profitable for long even in the driverful car market. And when driverless cars come along, the amount of possible well-funded competitors (BMW, GM, Ford, Virgin, Enterprise, Google, etc, etc) means it's unlikely to get better.
[1] https://www.recode.net/2017/8/31/16227670/uber-lyft-market-s...
Think about it. Ridesharing currently only accounts for approximately 0.1% of all miles driven? And you don't see the upside for this market?
Thanks, I have thought about it.
I see some upside, although probably less than you. Even if the market ends up being large, though, that only matters if a) they have a large share of it, and b) competition doesn't drive margins to approximately zero.
Facebook and Google are worth a zillion dollars because there is little competitive pressure. GM's market cap is less than 1/10th of Google's because they face stiff competition. Or compare with airlines. The top 3 airlines by revenue bring in circa $120bn per year versus Google's $90bn. But the market cap of those airlines is only $70bn combined versus $729bn for Google.
I think airlines are good comparison for the pseudo-taxi market. Barrier to entry isn't huge, and lots of well funded people like to play in the space. That means that consumer price competition is cutthroat; profit margins and market caps thus stay low.
But Uber's in a worse position than an airline. A 777 or an A380 costs upwards of $300 million, and you need more than one of them to be a plausible airline. For pseudo-taxis, though, you just need some software (likely available via white label), a few drivers in one city, and a bit of local marketing muscle. It costs 3-4 orders of magnitude less to start a 1-city Uber competitor than a regional airline.
And there are an awful lot of people who want a slice of the future transportation pie, including every single car manufacturer (who can have custom cars at cost), every car rental company (which combined have 2m cars and 20k locations, a number of major tech companies (certainly Google, possibly Apple and Amazon, surely others), and possibly anybody with a strong brand (e.g., perhaps Virgin, GE, Ikea, LVMH).
So no, I don't think Uber's valuation was justified. Neither does Softbank, obviously, or anybody else with the money to buy in. But I think it will go lower still.
I see some upside, although probably less than you. Even if the market ends up being large, though, that only matters if a) they have a large share of it, and b) competition doesn't drive margins to approximately zero.
Facebook and Google are worth a zillion dollars because there is little competitive pressure. GM's market cap is less than 1/10th of Google's because they face stiff competition. Or compare with airlines. The top 3 airlines by revenue bring in circa $120bn per year versus Google's $90bn. But the market cap of those airlines is only $70bn combined versus $729bn for Google.
I think airlines are good comparison for the pseudo-taxi market. Barrier to entry isn't huge, and lots of well funded people like to play in the space. That means that consumer price competition is cutthroat; profit margins and market caps thus stay low.
But Uber's in a worse position than an airline. A 777 or an A380 costs upwards of $300 million, and you need more than one of them to be a plausible airline. For pseudo-taxis, though, you just need some software (likely available via white label), a few drivers in one city, and a bit of local marketing muscle. It costs 3-4 orders of magnitude less to start a 1-city Uber competitor than a regional airline.
And there are an awful lot of people who want a slice of the future transportation pie, including every single car manufacturer (who can have custom cars at cost), every car rental company (which combined have 2m cars and 20k locations, a number of major tech companies (certainly Google, possibly Apple and Amazon, surely others), and possibly anybody with a strong brand (e.g., perhaps Virgin, GE, Ikea, LVMH).
So no, I don't think Uber's valuation was justified. Neither does Softbank, obviously, or anybody else with the money to buy in. But I think it will go lower still.
Yea, I'm not justifying the valuation at all, just the business model
I use Uber on a regular basis and have always been happy with the service. I attempted Uber eats twice. I wrote of the first bad experience as a one off, the second time was a sign
Uber trumpets it and crows when they come close to profitability in markets. You're nuts if you think that Uber is profitable in North America.
There is clearly some profitable ride-sharing business in the general Uber model, but it remains unclear that there is a profitable ride-sharing business with enough gross revenue to justify a 10x unicorn business. Uber's main problems with profit margins aren't Uber Eats or even driverless cars, it's in getting their ride volumes up.
There is clearly some profitable ride-sharing business in the general Uber model, but it remains unclear that there is a profitable ride-sharing business with enough gross revenue to justify a 10x unicorn business. Uber's main problems with profit margins aren't Uber Eats or even driverless cars, it's in getting their ride volumes up.
I never said their valuation is justified, just that their business model works. The costs of providing their booking service is small compared to the revenues it generates. The only question is how much do they have to spend on end user marketing and driver recruitment.
SoftBank has huge bets in all the global rideshare companies, which includes Grab and Ola as well as Uber and Didi.
The bet is on providing sophisticated transportation logistics in fast growing developing world cities that are currently served by a hodge podge of unaccountable, poorly coordinated small time private transportation companies, and where overwhelmed regional governments are unable to provide sufficient public transportation services.
It's an addressable market of potentially billions of people who will never own cars, and and currently have limited options.
The bet is on providing sophisticated transportation logistics in fast growing developing world cities that are currently served by a hodge podge of unaccountable, poorly coordinated small time private transportation companies, and where overwhelmed regional governments are unable to provide sufficient public transportation services.
It's an addressable market of potentially billions of people who will never own cars, and and currently have limited options.
They probably could if they focused on profitable markets. They’ve been burning money because they’ve been obsessed with growth as opposed to profitable growth.
That’s what they seem to be doing. http://www.businessinsider.com/uber-sells-auto-leasing-busin...:
”Uber has found a buyer, and a partner, for its auto-leasing business that was losing more money than expected”.
”Uber has found a buyer, and a partner, for its auto-leasing business that was losing more money than expected”.
Is a 30% haircut really enough to make the investment worthwhile if Uber doesn't make it?
It depends how they hedge that investment. A 30% discount on the basis means you can be very aggressive with your hedge positions.
I'd say it's way too early to speculate yet...but somewhere within softbank, a risk manager is already planning on the whole deal to fail(that's his/her job), and how to keep the effects of that failure from being catastrophic.
I'd say it's way too early to speculate yet...but somewhere within softbank, a risk manager is already planning on the whole deal to fail(that's his/her job), and how to keep the effects of that failure from being catastrophic.
Do you see Lyft exceeding Uber's success?
Impossible, Overall Uber's network effect is strong, also Uber has a lot of strategic move like Eats, Freight and ATG. I feel Eats and Freight will be huge in near term and ATG is invaluable in long term.
Dear Uber,
You don't need one thousand and five hundred developers to keep a mobile app going.
Paywall:
http://archive.is/4w0Jn
I'm under the impression this is a totally different class of stock than the $70B valuation round?
Common stock at a $49B valuation is entirely different from preferred stock at a $70B valuation with what I'll assume includes a lot of "fine print" around pro-rata and/or liquidation preferences.
Feels a little clickbait-y to say the valuation took a haircut when we're talking about different classes of stock.