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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

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...
  - deleted 9y ago
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simonrobb 9y ago
> Uber can’t be worth $69B unless the values of all the shares (including the common) add up to $69B This deal is effectively a one-time secondary market for existing investors to sell their stock. If I'm an early employee who has been wearing golden handcuffs for the last eight years, I'd probably accept a lower purchase price than "what they're worth" for the sake of that liquidity. That doesn't reflect upon Uber, or Uber's value. What you're saying might be true if this were a perfect market, but there's externalities in that market (like liquidity) which you're not considering. > valuation = number of shares times last preferred price, but that’s a convenient fiction. Fiction as it may be, it's the best instrument the public has to work out the value of a private company. Investors have access to internal numbers, apply due diligence (we assume, since it's their money), and give their best guess as to future returns. That doesn't mean we shouldn't scrutinise the valuation investors accept during a round, but let's not pretend it's not a good marker. > $48B (or whatever it may be) is a spectacular success by any measure I doubt existing investors would see it that way, if $21B were wiped off the valuation as reported. > I’m not sure what you’re so defensive about My apologies if that's the way it came across. I stand by the criticism I made of the article.
- yellow_postit 9y ago
  There are some much better models out there for valuation though not quite as simple. Discussion from about 6 months ago https://news.ycombinator.com/item?id=14467869 https://news.ycombinator.com/item?id=14467869 I see nothing wrong with Bloomberg’s reporting here, as described this would, and should, lower Uber’s valuation but as the other poster points out it isn’t a straight 30% drop.
  - simonrobb 9y ago
    Good reading. Thanks for the link. I don't understand how this model can be applied to private companies. It seems to require a cap table, which isn't publicly available until after the company goes public. I understand that in the example given (Square), the analysis calculates the fair market value at the time of their Series E, but it was performed after they went public, with the benefit of the cap table. Can this actually be used by the public in place of a funding valuation? I agree there are flaws in using that number as a representation of a company's value, and to be clear: I'm not arguing that Uber's $69B valuation is not inflated. I'm arguing that it's inaccurate to report Uber was worth $69B at their last round, and now that SoftBank intends to buy common stock at $48B, Uber are valued at $48B (or some dramatically reduced value in-between). I'm arguing that because SoftBank is not offering $X/share to Uber in exchange for newly issued shares, as is the case in a funding round. This is a transfer of ownership between existing shareholders, and if they can strike a deal in this secondary market then so be it. It doesn't affect Uber in the way a funding round does: they've allowed the deal to go down, but they a) receive none of the money changing hands (that goes to the shareholders who are selling), and b) take no dilution. So it's unfair to say that this sale price is indicative of the company's valuation in the same way a new funding round would be - they are entirely different beasts.

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...
- deleted 9y ago
  [deleted]

simonrobb 9y ago

> Uber can’t be worth $69B unless the values of all the shares (including the common) add up to $69B This deal is effectively a one-time secondary market for existing investors to sell their stock. If I'm an early employee who has been wearing golden handcuffs for the last eight years, I'd probably accept a lower purchase price than "what they're worth" for the sake of that liquidity. That doesn't reflect upon Uber, or Uber's value. What you're saying might be true if this were a perfect market, but there's externalities in that market (like liquidity) which you're not considering. > valuation = number of shares times last preferred price, but that’s a convenient fiction. Fiction as it may be, it's the best instrument the public has to work out the value of a private company. Investors have access to internal numbers, apply due diligence (we assume, since it's their money), and give their best guess as to future returns. That doesn't mean we shouldn't scrutinise the valuation investors accept during a round, but let's not pretend it's not a good marker. > $48B (or whatever it may be) is a spectacular success by any measure I doubt existing investors would see it that way, if $21B were wiped off the valuation as reported. > I’m not sure what you’re so defensive about My apologies if that's the way it came across. I stand by the criticism I made of the article.

yellow_postit 9y ago
There are some much better models out there for valuation though not quite as simple. Discussion from about 6 months ago https://news.ycombinator.com/item?id=14467869 https://news.ycombinator.com/item?id=14467869 I see nothing wrong with Bloomberg’s reporting here, as described this would, and should, lower Uber’s valuation but as the other poster points out it isn’t a straight 30% drop.
- simonrobb 9y ago
  Good reading. Thanks for the link. I don't understand how this model can be applied to private companies. It seems to require a cap table, which isn't publicly available until after the company goes public. I understand that in the example given (Square), the analysis calculates the fair market value at the time of their Series E, but it was performed after they went public, with the benefit of the cap table. Can this actually be used by the public in place of a funding valuation? I agree there are flaws in using that number as a representation of a company's value, and to be clear: I'm not arguing that Uber's $69B valuation is not inflated. I'm arguing that it's inaccurate to report Uber was worth $69B at their last round, and now that SoftBank intends to buy common stock at $48B, Uber are valued at $48B (or some dramatically reduced value in-between). I'm arguing that because SoftBank is not offering $X/share to Uber in exchange for newly issued shares, as is the case in a funding round. This is a transfer of ownership between existing shareholders, and if they can strike a deal in this secondary market then so be it. It doesn't affect Uber in the way a funding round does: they've allowed the deal to go down, but they a) receive none of the money changing hands (that goes to the shareholders who are selling), and b) take no dilution. So it's unfair to say that this sale price is indicative of the company's valuation in the same way a new funding round would be - they are entirely different beasts.