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SoftBank Succeeds in Tender Offer for Large Stake in Uber
- QAPereo 9y agoDoes 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.
- icebraining 9y agoIs a 30% haircut really enough to make the investment worthwhile if Uber doesn't make it?
- module0000 9y agoIt 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.
- davewritescode 9y agoThey 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.
- Someone 9y agoThat’s what they seem to be doing. http://www.businessinsider.com/uber-sells-auto-leasing-business-xchange-leasing-to-faircom-2017-12 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”.
- valuearb 9y agoUber 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.
- aetherson 9y agoUber 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.
- valuearb 9y agoI 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.
- Fricken 9y agoSoftBank 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.
- joncrane 9y agoDo you see Lyft exceeding Uber's success?
- icecreameasier 9y agoImpossible, 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.
- jonknee 9y agoStill 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 https://twitter.com/alfredjlee/status/946443457039540225
- chatmasta 9y agoShould have invested in bitcoin instead! ;)
- gallerdude 9y agoThis is why there’s a unicorn obsession.
- deleted 9y ago[deleted]
- msoad 9y agoA 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!
- seanmcdirmid 9y agoBut 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://www.uber.com/country-list/ https://en.m.wikipedia.org/wiki/Uber_(company)#Legal_status_by_country https://en.m.wikipedia.org/wiki/Uber_(company)#Legal_status_...
- msoad 9y agoYes, 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!
- trophycase 9y agoIn my experience, the Didi app is inferior to Uber's. Not sure how they would manage to outcompete.
- seanmcdirmid 9y agoIt might not be a fair comparison since didi never had an English interface.
- scarmig 9y agoHow 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?
- discordianfish 9y agoMaybe I’m alone but my initial reaction was: “oh 30% doesn’t sound that bad”.
- wpietri 9y agoIt'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.
- pedrosorio 9y agoUber has been making offers in RSUs for more than 2 years: https://www.reddit.com/r/cscareerquestions/comments/3u5asj/uber_rsu_offer/ https://www.reddit.com/r/cscareerquestions/comments/3u5asj/u...
- wpietri 9y agoAh, good point. Here's confirmation of that from the NYT: https://www.nytimes.com/2017/03/03/technology/uber-said-to-consider-changes-to-employee-stock-compensation.html?_r=0 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.
- icecreameasier 9y agoStop the eye catching title, It is very normal tender offer with some discount. FB did http://allthingsd.com/20110210/exclusive-facebook-exploring-tender-offer-for-1-billion-of-employee-shares-at-60-billion-valuation/ http://allthingsd.com/20110210/exclusive-facebook-exploring-...
- thisisit 9y ago> 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-thinks-some-uber-shares-are-worth-more-than-others 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.
- arvinder 9y agoPaywall: http://archive.is/4w0Jn http://archive.is/4w0Jn
- rpmcmurphy 9y agoIf 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.
- bsiemon 9y agoDoes 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.
- xandar11 9y agoThere is a great analysis of Uber's failed business model by Hubert Horan [1] [1] http://horanaviation.com/Uber.html http://horanaviation.com/Uber.html
- icecreameasier 9y agoso you mean the whole rider sharing is scam? lol
- hinkley 9y agoIn 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...
- jdavis703 9y agoSoftBank has a minority, 15% stake. Will they really have enough authority and juice with the other board members to execute a boardroom coup?
- ISL 9y agoThey will if 35% of shareholders agree with them.
- hinkley 9y agoYeah 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.
- jy1 9y ago15% is a HUGE stake... Even Kalanick has <10%
- robhunter 9y agoAre 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.
- xyzzy_plugh 9y agoIndeed, 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.
- xocyabencl 9y agoIf 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.
- xyzzy_plugh 9y agoNo, 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.
- xocyabencl 9y agoCommon stock is worth less than preferred. Most stock is not preferred. Therefore there was never $70B worth of Uber stock in existence.
- NelsonMinar 9y agoWhat'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.
- ec109685 9y agoThe 1B at 70B valuation is preferred stock.
- smallnamespace 9y agoThe question is why you would quote that number if preferred stock isn't 100% of the capital structure.
- suff 9y agoDear Uber, You don't need one thousand and five hundred developers to keep a mobile app going.
- graton 9y agoIf 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); 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.
- danjoc 9y agoI have to have Facebook to access the web. Net neutrality.
- dragonwriter 9y agoThis 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.
- danjoc 9y agoClicked 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.
- adjkant 9y agooutline.com makes this process a lot easier. Go there, paste link, read. https://outline.com/S9t4AN https://outline.com/S9t4AN
- pwaai 9y agoI 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-problems-brought-into-new-clearity-fall-to-billionaire-led-softbank-to-solve/#587220977159 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.
- StreamBright 9y agoI am not sure if this will be their most lucrative investment of all times.
- brucephillips 9y agoI wonder how this liquidation opportunity will be doled out to common stock holders. Proportionally? FIFO?
- Improvotter 9y agoCan we please not post websites that require a paid subscription?