Are they not just buying common stock or Series Seed/A/B stock from existing investors?
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.
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]
> 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.
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
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.
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.
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.
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.
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.
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.
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...
> 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.
> 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.
Then go to the WSJ.com page and click the bookmarklet, it takes you to Facebook, which then offers to take you to WSJ.com, and then you can read the article.
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?
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.
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.
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.
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.
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.
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.
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.
[+] [-] robhunter|8 years ago|reply
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.
[+] [-] eddieplan9|8 years ago|reply
[1] http://kara.allthingsd.com/20090713/facebookers-start-cashin...
[+] [-] xyzzy_plugh|8 years ago|reply
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.
[+] [-] drawnwren|8 years ago|reply
[+] [-] JumpCrisscross|8 years ago|reply
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.
[+] [-] flylib|8 years ago|reply
[+] [-] msoad|8 years ago|reply
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!
[+] [-] alextheparrot|8 years ago|reply
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.
[+] [-] kurthr|8 years ago|reply
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.
[+] [-] shubhamjain|8 years ago|reply
If that holds true, Softbank has managed to have a stake in every major app-based-taxi company of the future.
[+] [-] seanmcdirmid|8 years ago|reply
https://www.uber.com/country-list/
https://en.m.wikipedia.org/wiki/Uber_(company)#Legal_status_...
[+] [-] u320|8 years ago|reply
[+] [-] StreamBright|8 years ago|reply
[+] [-] chx|8 years ago|reply
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.
[+] [-] pwaai|8 years ago|reply
- 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.
[+] [-] jonknee|8 years ago|reply
> 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
[+] [-] chatmasta|8 years ago|reply
[+] [-] unknown|8 years ago|reply
[deleted]
[+] [-] gallerdude|8 years ago|reply
[+] [-] hinkley|8 years ago|reply
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...
[+] [-] jdavis703|8 years ago|reply
[+] [-] thisisit|8 years ago|reply
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.
[+] [-] graton|8 years ago|reply
[+] [-] adjkant|8 years ago|reply
https://outline.com/S9t4AN
[+] [-] danjoc|8 years ago|reply
Net neutrality.
[+] [-] scarmig|8 years ago|reply
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?
[+] [-] discordianfish|8 years ago|reply
[+] [-] austenallred|8 years ago|reply
[+] [-] deferred|8 years ago|reply
[+] [-] rpmcmurphy|8 years ago|reply
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.
[+] [-] bsiemon|8 years ago|reply
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.
[+] [-] NelsonMinar|8 years ago|reply
I'm with discordianfish in saying only 30% down sounds better than it could have been for Uber.
[+] [-] ec109685|8 years ago|reply
[+] [-] StreamBright|8 years ago|reply
[+] [-] xandar11|8 years ago|reply
[1] http://horanaviation.com/Uber.html
[+] [-] icecreameasier|8 years ago|reply
[+] [-] Improvotter|8 years ago|reply
[+] [-] brucephillips|8 years ago|reply
[+] [-] QAPereo|8 years ago|reply
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.
[+] [-] valuearb|8 years ago|reply
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.
[+] [-] Fricken|8 years ago|reply
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.
[+] [-] davewritescode|8 years ago|reply
[+] [-] icebraining|8 years ago|reply
[+] [-] joncrane|8 years ago|reply
[+] [-] suff|8 years ago|reply
[+] [-] arvinder|8 years ago|reply
[+] [-] icecreameasier|8 years ago|reply
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