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Just so we are clear: - Softbank will invest $1B in Uber at a $69B valuation - this is the same as their old valuation. This sale will create new shares and th
by BukhariH 9y ago
Just so we are clear:
- Softbank will invest $1B in Uber at a $69B valuation - this is the same as their old valuation. This sale will create new shares and therefore dilution.
- However, the offer is contingent on Softbank being able to buy a significant number of pre-existing shares at a $48B valuation from early investors - no dilution here.
- If they don't get enough investors to agree to sell at $49B then the whole deal is off the table.
- dopamean 9y agoWhat is the justification for saying that new shares are worth more than existing ones?
- fjni 9y agoI’d guess liquidation preference for the newly issued shares.
- mattnewton 9y agoPretending real hard this isn’t a down round?
- nwatson 9y agoMaybe they figure early institutional investors with Series A, B, C, ... realize their shares will lose out in a liquidity event to preferential treatment for those with later shares, and so will be willing to sell their early shares for less.
- snaily 9y agoThe new ones are presumably the most senior class, and would likely come with rights such as liquidation preferences that would make them have a higher expected value (in the eyes of Softback).
- sethev 9y agoThere doesn't have to be any justification. Maybe they're hoping enough early investors want to lock-in their paper profits that they'll accept the offer.
- btilly 9y agoOne justification is that spending on new shares gives them a higher return than spending on old. When you spend on old, someone with no further interest in Uber has money in their pocket. When you create new ones, you've just injected money into Uber, which increases its likelihood of survival. If they are buying enough to get control, they can now choose to spend that $1 billion in ways that channel money back into other companies that they own. Thereby further reducing the cost to them of providing that money. (Presumably, though, the money channeled back will be for products that help Uber. This looks like a shell game but isn't.)
- teemwerk 9y agoI don't want to spam this article all over, but Matt Levine, also at Bloomberg, I felt had a much better overview of that question almost verbatim, plus imo he's an excellent writer. https://www.bloomberg.com/view/articles/2017-11-16/softbank-thinks-some-uber-shares-are-worth-more-than-others https://www.bloomberg.com/view/articles/2017-11-16/softbank-...
- dopamean 9y agoThis was a great read. Thanks for sharing it. Levine is a super talented writer.
- IncRnd 9y agoOne is an investment and infusion of capital. The other is purchasing somebody else's investment that doesn't do anything for the company's cash.
- jayzalowitz 9y agoThe founders are probably getting out. Or at least the founding team / seed / etc.
- deleted 9y ago[deleted]