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"...at a price that would value the ride-hailing company at 30 percent less than its most recent $69 billion valuation". This is not true, it has no effect on

"...at a price that would value the ride-hailing company at 30 percent less than its most recent $69 billion valuation". This is not true, it has no effect on the current valuation at all. Softbank are looking to buy shares at this lower valuation since they are a different class of share to what they would get otherwise; these are common stock (employees will be a major source of stock for the sale) and therefore don't have the same benefits of preferred stock, of course they expect a better price. Where they are receiving preferred shares (the $1B investment) they are using the $69B valuation from Uber's last round (presumably this $1B is being added as a late-comer to that round). I can't believe that a Bloomberg reporter would get this wrong, so this sounds a lot like jumping on the media band wagon. Suggesting Uber has lost 30% of its value is blatantly false. Edit: It's fair to say there might be some impact on the notional valuation between rounds, which is hazy at the best of times. However it's not a 30% cut.

shard972 9y ago
You might be right, but who should I believe? Bloomberg™ or commentators on HN?
- simonrobb 9y ago
  I don't think an appeal to authority adds much to the conversation here. Mainstream media (and social media, and niche media) should be open to fact-checking by the public now more than ever.
  - revelation 9y ago
    No, it means with the public data available it is impossible to say as a matter of fact what you are claiming. We don't know the split between preferred and ordinary and we don't know the liquidation terms.
  - blfr 9y ago
    Grandparent was probably joking but I also don't think an appeal to authority adds much to the conversation here because mainstream media doesn't have much authority left.
IncRnd 9y ago
> Softbank are looking to buy shares at this lower valuation since they are a different class of share to what they would get otherwise That is a distinction without a difference. What matters is the perception of the purchase, which very well may drive Uber's price up or down. The size of the purchase often is the determining factor, as large purchases establish price. This is a similar mechanism as prices returning to earlier levels after a stock split.
saas_co_de 9y ago
If the last market price is $48B then the market says Uber lost 30% of its value. Hope no one is using their Uber stock as collateral for loans.
- alex_young 9y ago
  > Hope no one is using their Uber stock as collateral for loans. Wow. I hope no one is taking Uber stock as collateral.
  - yellow_postit 9y ago
    I would imagine some are. In the valley especially this seems like a good instrument, appropriately risk managed, to offer if it is possible.
aaavl2821 9y ago
If they are buying a combination of preferred at a $69B valuation and common at a 30% lower valuation, it is certainly possible that the overall valuation is a discount to the $69B. Hard to know without seeing detailed terms I'm sure the liquidation preference (presumably 1x?) is worth something, but is it worth a 5-10-20-30% discount? At Uber's current valuation, the preferred would convert anyway so the liquidation preference would not be relevant Edit: saw that the total investment is slated to be $10B, with $1B invested at the $69B valuation and the rest presumably in common shares at a 30% discount. It could be true that this does not represent a decrease in valuation, but there is reason to believe that the overall valuation is a step down. Devil in the details
- simonrobb 9y ago
  > it has no effect on the current valuation at all Agreed, this statement was probably a little strong. But certainly it doesn't represent a new $48B valuation as the article suggests. I suppose I'm objecting to the implied suggestion that Uber is having a down round (a few other commenters have jumped on that) because of the negative public sentiment they are copping at the moment. It's not like Uber needs cash right now, and I really doubt the board would approve a deal which brought their valuation down for the sake of money they don't need.
  - aaavl2821 9y ago
    The headline was certainly provocative and misleading. Could interpret this as a bit of signaling risk with early investors cashing out at a discount, but I don't think that's fair. There isn't really precedent for a $4B+ non m&a or IPO liquidity event for private company shareholders. The liquidity discount that private equity investors use is typically 20-30%, so now that I think about it the 30% discount seems like a logical liquidity discount to anchor on
  - deleted 9y ago
    [deleted]
- simonrobb 9y ago
  I may be falling for a nice perception play from Uber, but I took this more-or-less at face value: Softbank is buying up a lot of valuable property at the moment, and even though Uber wouldn't be raising again for another 6-12 months, they wanted a piece. This is the mechanism they managed to negotiate. Early shareholders gain liquidity, Softbank gets cheap stock, and the market gets some bullish signals on Uber in the form of Softbank's backing. From the outside it looks like a pretty good deal. Of course there might be internal panic and I've got it all wrong, but I see some big wins for both parties.
teemwerk 9y ago
I think you'll find varied opinions in an organization as sprawling as Bloomberg. My favorite writer Matt Levine had a short blurb about this, he's consistently pretty sharp with a dash of humor. 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-...
- spullara 9y ago
  This is probably the 409a valuation of the shares after the last round.
- aaavl2821 9y ago
  Matt Levine is one of my favorite finance / business writers of all time. Really good grasp on technical financial details as well as the complex incentives that drive markets. He doesn't really get how the tech world works (maybe that's changed; haven't followed him regularly in a year or so) but a lot of fintech people would benefit from reading him
JumpCrisscross 9y ago
> Softbank are looking to buy shares at this lower valuation since they are a different class of share to what they would get otherwise; these are common stock (employees will be a major source of stock for the sale) They are different, but not that different. Also, Softbank are purchasing both common and earlier preferred as part of their tender. All at the same price. Someone tendering their Series F or G preferred stock would sell at a lower price than what they paid (in the case of the latter, over 30% less). The tender is at a discount. It is a down round. The $1bn at $69bn is simply a cute ploy investors are pulling to avoid having to mark down a big investment. Disclaimer: I am not a lawyer. This is not legal nor securities advice. Do not buy or sell anything based on this Internet comment.
- spikels 9y ago
  Just to get the terminology right: A tender is not a "round" - as in "a round (or series) of financing".
  - JumpCrisscross 9y ago
    > A tender is not a "round" "Round" is a colloquialism. It just means a financing. (Private equity "rounds", for instance, regularly contain dividend recap and other non-company benefiting components.) This financing was structured specifically to make its nature ambiguous. Debating what to call it is, by design, tedious.
paulsutter 9y ago
Hold on a second, you’ve got it wrong. Uber can’t be worth $69B unless the values of all the shares (including the common) add up to $69B. While sure, selling common at a 30% discount doesn’t necessarily mean the company is worth exactly 30% less. But it is worth less. And 48B is going to be closer to the truth than $69B. Keep in mind the preferreds are giving up a bunch of voting rights here too. Yes it’s common practice to say the valuation = number of shares * last preferred price, but that’s a convenient fiction. All that said, $48B (or whatever it may be) is a spectacular success by any measure so I’m not sure what you’re so defensive about.
- linkregister 9y ago
  It all depends on the value of the common stock. If the common stock is worth 30% less than the preferred stock, then the common stock purchase should be zero-sum. If it is worth more, then SoftBank is indeed buying at a bargain and this is analogous to a down round. Just the fact alone that they’re getting preferred shares at the same price as the last round is a bad sign. Shouldn’t companies be trying to increase valuations at each round? I didn’t see any defensiveness on the part of the parent poster. Your expressions conveyed more emotion. That said, they added color to your writing and shouldn’t be omitted.
  - JumpCrisscross 9y ago
    > Shouldn’t companies be trying to increase valuations at each round? A CEO, who was pushed out [1] over a sexual harassment scandal [2][3] while his company was being sued by fucking Google [4], launched a civil war at the Board level [5]. An outsider had to be brought in to save the peace [6]. Also they got hacked and tried to cover it up [7]. Yes, bigger valuation is generally better than smaller valuation. But sometimes smaller valuation has to do. [1] https://www.nbcdfw.com/news/business/Uber-CEO-Travis-Kalanick-Steps-Down-429816703.html https://www.nbcdfw.com/news/business/Uber-CEO-Travis-Kalanic... [2] https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-on... [3] https://www.nytimes.com/2017/02/19/business/uber-sexual-harassment-investigation.html?_r=0 https://www.nytimes.com/2017/02/19/business/uber-sexual-hara... [4] https://www.reuters.com/article/us-alphabet-uber-lawsuit/waymo-seeks-delay-of-uber-trade-secrets-trial-over-new-evidence-idUSKBN1DS02B https://www.reuters.com/article/us-alphabet-uber-lawsuit/way... [5] https://techcrunch.com/2017/08/30/pishevar-says-delaware-court-is-sending-benchmark-lawsuit-to-arbitration/ https://techcrunch.com/2017/08/30/pishevar-says-delaware-cou... [6] https://www.bloomberg.com/news/articles/2017-09-27/uber-softbank-deal-is-said-to-ensure-limits-on-kalanick-s-power https://www.bloomberg.com/news/articles/2017-09-27/uber-soft... [7] https://www.engadget.com/2017/11/25/uber-ceo-knew-about-hack-months-in-advance/ https://www.engadget.com/2017/11/25/uber-ceo-knew-about-hack...
malandrew 9y ago
Yup, exactly this. The discount in a tender offer is normal. DST also discounted Facebook back when it made a $100m tender to existing employees and shareholders. Look at how TechCrunch reported on that tender offer when it happened: https://techcrunch.com/2009/07/13/dst-to-buy-up-to-100-million-in-facebook-employee-stock/ https://techcrunch.com/2009/07/13/dst-to-buy-up-to-100-milli... Furthermore, SoftBank has a lot of leverage that DST did not. SoftBank has invested in Ola, Grab, Didi, Nvidia, etc. and threatened to invest in Lyft. It has leverage that allows it to get a better offer than what any other investor could get.

shard972 9y ago

You might be right, but who should I believe? Bloomberg™ or commentators on HN?

simonrobb 9y ago
I don't think an appeal to authority adds much to the conversation here. Mainstream media (and social media, and niche media) should be open to fact-checking by the public now more than ever.
- revelation 9y ago
  No, it means with the public data available it is impossible to say as a matter of fact what you are claiming. We don't know the split between preferred and ordinary and we don't know the liquidation terms.
- blfr 9y ago
  Grandparent was probably joking but I also don't think an appeal to authority adds much to the conversation here because mainstream media doesn't have much authority left.

IncRnd 9y ago

> Softbank are looking to buy shares at this lower valuation since they are a different class of share to what they would get otherwise That is a distinction without a difference. What matters is the perception of the purchase, which very well may drive Uber's price up or down. The size of the purchase often is the determining factor, as large purchases establish price. This is a similar mechanism as prices returning to earlier levels after a stock split.

saas_co_de 9y ago

If the last market price is $48B then the market says Uber lost 30% of its value. Hope no one is using their Uber stock as collateral for loans.

alex_young 9y ago
> Hope no one is using their Uber stock as collateral for loans. Wow. I hope no one is taking Uber stock as collateral.
- yellow_postit 9y ago
  I would imagine some are. In the valley especially this seems like a good instrument, appropriately risk managed, to offer if it is possible.

aaavl2821 9y ago

If they are buying a combination of preferred at a $69B valuation and common at a 30% lower valuation, it is certainly possible that the overall valuation is a discount to the $69B. Hard to know without seeing detailed terms I'm sure the liquidation preference (presumably 1x?) is worth something, but is it worth a 5-10-20-30% discount? At Uber's current valuation, the preferred would convert anyway so the liquidation preference would not be relevant Edit: saw that the total investment is slated to be $10B, with $1B invested at the $69B valuation and the rest presumably in common shares at a 30% discount. It could be true that this does not represent a decrease in valuation, but there is reason to believe that the overall valuation is a step down. Devil in the details

simonrobb 9y ago
> it has no effect on the current valuation at all Agreed, this statement was probably a little strong. But certainly it doesn't represent a new $48B valuation as the article suggests. I suppose I'm objecting to the implied suggestion that Uber is having a down round (a few other commenters have jumped on that) because of the negative public sentiment they are copping at the moment. It's not like Uber needs cash right now, and I really doubt the board would approve a deal which brought their valuation down for the sake of money they don't need.
- aaavl2821 9y ago
  The headline was certainly provocative and misleading. Could interpret this as a bit of signaling risk with early investors cashing out at a discount, but I don't think that's fair. There isn't really precedent for a $4B+ non m&a or IPO liquidity event for private company shareholders. The liquidity discount that private equity investors use is typically 20-30%, so now that I think about it the 30% discount seems like a logical liquidity discount to anchor on
- deleted 9y ago
  [deleted]
simonrobb 9y ago
I may be falling for a nice perception play from Uber, but I took this more-or-less at face value: Softbank is buying up a lot of valuable property at the moment, and even though Uber wouldn't be raising again for another 6-12 months, they wanted a piece. This is the mechanism they managed to negotiate. Early shareholders gain liquidity, Softbank gets cheap stock, and the market gets some bullish signals on Uber in the form of Softbank's backing. From the outside it looks like a pretty good deal. Of course there might be internal panic and I've got it all wrong, but I see some big wins for both parties.

teemwerk 9y ago

I think you'll find varied opinions in an organization as sprawling as Bloomberg. My favorite writer Matt Levine had a short blurb about this, he's consistently pretty sharp with a dash of humor. 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-...

spullara 9y ago
This is probably the 409a valuation of the shares after the last round.
aaavl2821 9y ago
Matt Levine is one of my favorite finance / business writers of all time. Really good grasp on technical financial details as well as the complex incentives that drive markets. He doesn't really get how the tech world works (maybe that's changed; haven't followed him regularly in a year or so) but a lot of fintech people would benefit from reading him

JumpCrisscross 9y ago

> Softbank are looking to buy shares at this lower valuation since they are a different class of share to what they would get otherwise; these are common stock (employees will be a major source of stock for the sale) They are different, but not that different. Also, Softbank are purchasing both common and earlier preferred as part of their tender. All at the same price. Someone tendering their Series F or G preferred stock would sell at a lower price than what they paid (in the case of the latter, over 30% less). The tender is at a discount. It is a down round. The $1bn at $69bn is simply a cute ploy investors are pulling to avoid having to mark down a big investment. Disclaimer: I am not a lawyer. This is not legal nor securities advice. Do not buy or sell anything based on this Internet comment.

spikels 9y ago
Just to get the terminology right: A tender is not a "round" - as in "a round (or series) of financing".
- JumpCrisscross 9y ago
  > A tender is not a "round" "Round" is a colloquialism. It just means a financing. (Private equity "rounds", for instance, regularly contain dividend recap and other non-company benefiting components.) This financing was structured specifically to make its nature ambiguous. Debating what to call it is, by design, tedious.

paulsutter 9y ago

Hold on a second, you’ve got it wrong. Uber can’t be worth $69B unless the values of all the shares (including the common) add up to $69B. While sure, selling common at a 30% discount doesn’t necessarily mean the company is worth exactly 30% less. But it is worth less. And 48B is going to be closer to the truth than $69B. Keep in mind the preferreds are giving up a bunch of voting rights here too. Yes it’s common practice to say the valuation = number of shares * last preferred price, but that’s a convenient fiction. All that said, $48B (or whatever it may be) is a spectacular success by any measure so I’m not sure what you’re so defensive about.

linkregister 9y ago
It all depends on the value of the common stock. If the common stock is worth 30% less than the preferred stock, then the common stock purchase should be zero-sum. If it is worth more, then SoftBank is indeed buying at a bargain and this is analogous to a down round. Just the fact alone that they’re getting preferred shares at the same price as the last round is a bad sign. Shouldn’t companies be trying to increase valuations at each round? I didn’t see any defensiveness on the part of the parent poster. Your expressions conveyed more emotion. That said, they added color to your writing and shouldn’t be omitted.
- JumpCrisscross 9y ago
  > Shouldn’t companies be trying to increase valuations at each round? A CEO, who was pushed out [1] over a sexual harassment scandal [2][3] while his company was being sued by fucking Google [4], launched a civil war at the Board level [5]. An outsider had to be brought in to save the peace [6]. Also they got hacked and tried to cover it up [7]. Yes, bigger valuation is generally better than smaller valuation. But sometimes smaller valuation has to do. [1] https://www.nbcdfw.com/news/business/Uber-CEO-Travis-Kalanick-Steps-Down-429816703.html https://www.nbcdfw.com/news/business/Uber-CEO-Travis-Kalanic... [2] https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-on... [3] https://www.nytimes.com/2017/02/19/business/uber-sexual-harassment-investigation.html?_r=0 https://www.nytimes.com/2017/02/19/business/uber-sexual-hara... [4] https://www.reuters.com/article/us-alphabet-uber-lawsuit/waymo-seeks-delay-of-uber-trade-secrets-trial-over-new-evidence-idUSKBN1DS02B https://www.reuters.com/article/us-alphabet-uber-lawsuit/way... [5] https://techcrunch.com/2017/08/30/pishevar-says-delaware-court-is-sending-benchmark-lawsuit-to-arbitration/ https://techcrunch.com/2017/08/30/pishevar-says-delaware-cou... [6] https://www.bloomberg.com/news/articles/2017-09-27/uber-softbank-deal-is-said-to-ensure-limits-on-kalanick-s-power https://www.bloomberg.com/news/articles/2017-09-27/uber-soft... [7] https://www.engadget.com/2017/11/25/uber-ceo-knew-about-hack-months-in-advance/ https://www.engadget.com/2017/11/25/uber-ceo-knew-about-hack...

malandrew 9y ago

Yup, exactly this. The discount in a tender offer is normal. DST also discounted Facebook back when it made a $100m tender to existing employees and shareholders. Look at how TechCrunch reported on that tender offer when it happened: https://techcrunch.com/2009/07/13/dst-to-buy-up-to-100-million-in-facebook-employee-stock/ https://techcrunch.com/2009/07/13/dst-to-buy-up-to-100-milli... Furthermore, SoftBank has a lot of leverage that DST did not. SoftBank has invested in Ola, Grab, Didi, Nvidia, etc. and threatened to invest in Lyft. It has leverage that allows it to get a better offer than what any other investor could get.