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Softbank just took a huge stake in Uber at beginning of 2018 The valuation numbers have yoyo'd up to 120billion despite '....The deal includes a large purchas

Softbank just took a huge stake in Uber at beginning of 2018 The valuation numbers have yoyo'd up to 120billion despite '....The deal includes a large purchase of shares from existing Uber investors and employees at a discounted valuation for the company of $48 billion, a 30 percent drop from Uber’s most recent valuation of $68 billion. These secondary stock sales will be completed by the end of the day Thursday on the Nasdaq Private Market, an Uber spokesman said'. https://www.reuters.com/article/us-uber-softbank-tender/softbank-is-now-ubers-largest-shareholder-as-deal-closes-idUSKBN1F72WL https://www.reuters.com/article/us-uber-softbank-tender/soft... We've gone from a damaged company worth 48b in January to a 120b valuation in a few months. Presumably the Saudi and Japanese softbank investors are hoping to extract an ipo profit.

NTDF9 8y ago
> Presumably the Saudi and Japanese softbank investors are hoping to extract an ipo profit. Greater fool theory?
- Fricken 8y ago
  Not all the money in Uber is dumb. Early investors like Benchmark and GV had an exit opportunity when the Softbank deal was being negotiated, but none of them took it.
  - mbreese 8y ago
    But the early investors are less sensitive to the higher valuation volitity. I doubt GV really cares if the valuation is 59B or 100B. They were in early enough, that I suspect they’ll make a heavy profit regardless. It would be interesting to know if the final IPO values higher or lower than what SoftBank would have been offering, but even if Uber ends up lower, I’m sure there is relatively low risk to early investors. I’d love to know the actual numbers though.
    - acchow 8y ago
      > I doubt GV really cares if the valuation is 59B or 100B There is no VC that doesn't care about a 70% difference in returns.
      - mbreese 8y ago
        Disclaimer: I know none of these numbers... Let's say that GV had the opportunity to sell to SoftBank at a valuation of 50B. Let's just guess that they would getting a 500X return. Maybe they invested 1M early at a 10M valuation and got diluted to ~1% ownership. So 1% of 50B is 500M on a 1M investment. This is a great return for them. Congrats to all involved. But this could be considered something of a low-end valuation. Maybe it's more... maybe Uber can IPO at a 100B valuation. The difference between a 500X and 1000X exit is huge, but risky. Maybe they end up IPO'ing at only a 40B valuation. GV would still have a 400X exit. This is the risk GV would have to gauge. Now, if you're one of the later investors and spent 100M for 1%, then the (respective) numbers would be 5X (500M for a 100M investment), 10X, and 4X. For an late round investment like this, you may chose to exit at a locked in 5X, deeming the risk of a 4X exit too great. Thus my comment that earlier round investors would be less sensitive to whatever the ultimate IPO valuation is. A 400X exit would make a fund. A 4X exit, while good, isn't great. Again, I don't know the numbers and I suspect they are all significantly higher. I picked numbers that made the math easier. I also don't know who ultimately ended up cashing out (or when). So really, this is all speculation. But if anyone has the numbers, I'd love to know them!
sonnyblarney 8y ago
Private transactions may not be a very good measure of valuation. Remember that just because a few shares change hands at $X, doesn't mean that supply/demand puts them all at that price. Insiders might be more inclined to sell some off, there could be special terms, yada yada.
- hkhanna 8y ago
  Agreed. The shares sold in the secondary offering were likely shares of common stock, whereas the last round of funding would have been a sale of preferred stock. I would expect there to be a natural discount off the preferred valuation since the common stock doesn’t have the same downside protection. A 20-30% discount would not be at all unusual in my experience.
  - DSingularity 8y ago
    What is this "downside risk" that exists for common stock and not preferred stock?
    - hartem_ 8y ago
      Liquidation preference is one. Basically holders of the preferred stock get to cash out first and common stock holders get whatever’s left. In case of an exit at a lower than before valuation, for example, it’s not unusual for common stock to lose most (or all) of its value. The Venture Deals book is really insightful on this (and general startup financing) subject.
      - olivermarks 8y ago
        https://www.feld.com/archives/2016/10/venture-deals-third-edition.html https://www.feld.com/archives/2016/10/venture-deals-third-ed... This book? Thank you
        hartem_ 8y ago
        Yes.
smpetrey 8y ago
This will not end well, for anyone.
- koboll 8y ago
  except Lyft
mkolodny 8y ago
Toyota invested $500M in Uber in late August at a $72B valuation [1] [1] https://www.cnbc.com/2018/08/27/toyota-to-invest-500-million-in-uber-at-a-valuation-of-72b-wsj.html https://www.cnbc.com/2018/08/27/toyota-to-invest-500-million...
qubax 8y ago
>We've gone from a damaged company worth 48b in January to a 120b valuation in a few months. I remember some here were ragging on Softbank for overpaying in their Uber investment just a few months ago. Amazing how a few months can change things. > Presumably the Saudi and Japanese softbank investors are hoping to extract an ipo profit. I don't think they bought in for a quick profit. These guys buy in for info and influence. But nearly a 200% appreciation ( if the valuation holds and if they IPO ) in a year has to be tempting.

NTDF9 8y ago

> Presumably the Saudi and Japanese softbank investors are hoping to extract an ipo profit. Greater fool theory?

Fricken 8y ago
Not all the money in Uber is dumb. Early investors like Benchmark and GV had an exit opportunity when the Softbank deal was being negotiated, but none of them took it.
- mbreese 8y ago
  But the early investors are less sensitive to the higher valuation volitity. I doubt GV really cares if the valuation is 59B or 100B. They were in early enough, that I suspect they’ll make a heavy profit regardless. It would be interesting to know if the final IPO values higher or lower than what SoftBank would have been offering, but even if Uber ends up lower, I’m sure there is relatively low risk to early investors. I’d love to know the actual numbers though.
  - acchow 8y ago
    > I doubt GV really cares if the valuation is 59B or 100B There is no VC that doesn't care about a 70% difference in returns.
    - mbreese 8y ago
      Disclaimer: I know none of these numbers... Let's say that GV had the opportunity to sell to SoftBank at a valuation of 50B. Let's just guess that they would getting a 500X return. Maybe they invested 1M early at a 10M valuation and got diluted to ~1% ownership. So 1% of 50B is 500M on a 1M investment. This is a great return for them. Congrats to all involved. But this could be considered something of a low-end valuation. Maybe it's more... maybe Uber can IPO at a 100B valuation. The difference between a 500X and 1000X exit is huge, but risky. Maybe they end up IPO'ing at only a 40B valuation. GV would still have a 400X exit. This is the risk GV would have to gauge. Now, if you're one of the later investors and spent 100M for 1%, then the (respective) numbers would be 5X (500M for a 100M investment), 10X, and 4X. For an late round investment like this, you may chose to exit at a locked in 5X, deeming the risk of a 4X exit too great. Thus my comment that earlier round investors would be less sensitive to whatever the ultimate IPO valuation is. A 400X exit would make a fund. A 4X exit, while good, isn't great. Again, I don't know the numbers and I suspect they are all significantly higher. I picked numbers that made the math easier. I also don't know who ultimately ended up cashing out (or when). So really, this is all speculation. But if anyone has the numbers, I'd love to know them!

sonnyblarney 8y ago

Private transactions may not be a very good measure of valuation. Remember that just because a few shares change hands at $X, doesn't mean that supply/demand puts them all at that price. Insiders might be more inclined to sell some off, there could be special terms, yada yada.

hkhanna 8y ago
Agreed. The shares sold in the secondary offering were likely shares of common stock, whereas the last round of funding would have been a sale of preferred stock. I would expect there to be a natural discount off the preferred valuation since the common stock doesn’t have the same downside protection. A 20-30% discount would not be at all unusual in my experience.
- DSingularity 8y ago
  What is this "downside risk" that exists for common stock and not preferred stock?
  - hartem_ 8y ago
    Liquidation preference is one. Basically holders of the preferred stock get to cash out first and common stock holders get whatever’s left. In case of an exit at a lower than before valuation, for example, it’s not unusual for common stock to lose most (or all) of its value. The Venture Deals book is really insightful on this (and general startup financing) subject.
    - olivermarks 8y ago
      https://www.feld.com/archives/2016/10/venture-deals-third-edition.html https://www.feld.com/archives/2016/10/venture-deals-third-ed... This book? Thank you
      - hartem_ 8y ago
        Yes.

smpetrey 8y ago

This will not end well, for anyone.

koboll 8y ago
except Lyft

mkolodny 8y ago

Toyota invested $500M in Uber in late August at a $72B valuation [1] [1] https://www.cnbc.com/2018/08/27/toyota-to-invest-500-million-in-uber-at-a-valuation-of-72b-wsj.html https://www.cnbc.com/2018/08/27/toyota-to-invest-500-million...

qubax 8y ago

>We've gone from a damaged company worth 48b in January to a 120b valuation in a few months. I remember some here were ragging on Softbank for overpaying in their Uber investment just a few months ago. Amazing how a few months can change things. > Presumably the Saudi and Japanese softbank investors are hoping to extract an ipo profit. I don't think they bought in for a quick profit. These guys buy in for info and influence. But nearly a 200% appreciation ( if the valuation holds and if they IPO ) in a year has to be tempting.