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But. in such scenario, how can Buffet profit from under-performing Uber?
by gtt 8y ago
But. in such scenario, how can Buffet profit from under-performing Uber?
- flyinglizard 8y agoHe’s playing a very long game.
- gowld 8y agoNot really, he's making a convertible loan so that he gets paid in the short term, skimming VC bubble money.
- deleted 8y ago[deleted]
- MrFantastic 8y agoIt's a loan so he'd probably be in the 1st tier to get paid back if Uber went bankrupt. The equity would just be a bonus. Uber is currently positioned to win when they can get self-driving cars. Drivers are Uber's biggest expense.
- clairity 8y agodebt has higher priority than equity, so buffett would get paid in most underperforming scenarios. he may even have been asking to be preferred debt, so that he gets paid before other debtholders. if the company fails, he’s still be first in line to get paid to limit losses in that case. that’s the downside protection. if he still believed in the company even as it underperformed, the debt could be converted to equity (probably at very favorable conversion prices), basically buying the equity at a discount. he’d then be in position to exert some measure of control over management. in most underperforming cases he at least gets his money back plus some interest (not bad, but not great). in some cases, he gets cheap and possibly preferred equity in uber that’s already worth more than he paid, and possibly a lot more eventually.