How Khosrowshahi is grappling with Uber's past to execute a drama-free IPO

Dara Khosrowshahi had a problem. His name was Travis Kalanick.

That, of course, was nothing new. When Mr. Khosrowshahi took over as chief executive of Uber in 2017, he became the best-compensated janitor in Silicon Valley, with a mandate to clean up the mess left by the company’s exiled founder. But this time, in mid-April, Mr. Khosrowshahi faced a Travis headache that lay in the future.

Uber was just weeks away from its initial public offering. After years of scandal, infighting and user revolt, this was supposed to be a $91 billion moment of triumph, when employees would become wealthy and the public could buy a piece of an indisputably world-changing company. The problem for Mr. Khosrowshahi, according to two people briefed on the matter, was that Mr. Kalanick wanted to be there.

As a former C.E.O. and current board member, Mr. Kalanick had asked to take part in the hallowed New York Stock Exchange tradition of ringing the opening bell on May 10, the day Uber shares are slated to begin trading. He also wanted to bring his father, Donald Kalanick. It would be close to the second anniversary of the accidental death of Travis Kalanick’s mother, and of the dramatic boardroom coup that ousted him as boss. His presence on the exchange’s iconic balcony could make both Mr. Kalanick and the corporation appear resilient.

Mr. Khosrowshahi wasn’t having it. The original plan was to fill the rafters with Uber’s earliest employees and longest tenured drivers. Moreover, some people at the top of the company felt that Mr. Kalanick was still a toxic liability, and that Uber should keep him at maximum distance as it tried to convince constituents that employees truly abided by a new motto: “Do the right thing. Period.” Mr. Kalanick’s appearance would unavoidably rekindle public memories of just how much of a disaster his final year was.

Besides, Mr. Khosrowshahi had bigger things to worry about than I.P.O. pageantry. Uber is losing billions of dollars annually, and he needs to convince investors that it is a promising, long-term company — even if it won’t be turning a profit anytime soon. He didn’t need the distraction at Uber’s financial coming-out party. On May 3, shortly after this article was first published online, Mr. Khosrowshahi decided Mr. Kalanick wasn’t welcome on the balcony, according to an Uber executive briefed on the plans.

The C.E.O. wants to prove that the start-up has evolved past Mr. Kalanick’s raucous, tech-bro culture — and his strategy of setting barrels of money aflame in the pursuit of growth above all else. But Uber’s past, to state the obvious about a company that is only a decade old, is simply not that far gone. Almost every instance of Mr. Kalanick’s bare-knuckled approach to capitalism illuminates something about Uber’s viability as a business today. (Citing the quiet period before an I.P.O., representatives for Uber, Mr. Khosrowshahi and Mr. Kalanick all declined to comment.)

The company has little good will with consumers or regulators in multiple jurisdictions. And Uber still loses money on nearly every fare, using venture capital to subsidise rides, invest in new areas and beat back a set of global competitors that offer an essentially identical service.

Mr. Kalanick’s heavy reliance on venture funding could be problematic for a public Uber in at least two ways. Arguably, it instilled habits of indiscipline, because executives could simply ask for more money whenever they wanted it, like rich kids with no cap on their allowance.

Second, and more troubling for retail investors, the bulk of investment returns might have already been realised. Uber acknowledged in a recent filing that its growth is slowing, fuelling concern that venture firms, private equity shops, sovereign-wealth funds and other elite insiders have not left much upside for mom-and-pop investors.

The last big beneficiary of Uber’s private-market gains might have been SoftBank. The Japanese mega-conglomerate bought existing shares from Uber investors at a nadir, when the company was valued at roughly $42 billion. Just months later, as Uber recovered from its string of scandals, those shares had nearly doubled in value.

All I.P.O.s are by nature unpredictable, but with Uber the possible outcomes seem especially extreme. Is it a juggernaut that, like Amazon before it, will someday flip the switch to profitability? Or is it something more like eBay, a well-known but puttering giant with its best growth long since behind it?

For now, Mr. Khosrowshahi’s job is to execute a drama-free public offering. He was able to use the chaotic events of Mr. Kalanick’s departure and his own hiring to secure a lucrative incentive. If he is able to attain a valuation of more than $120 billion for Uber over a period of 90 consecutive days, according to two people familiar with the matter and language included in Uber’s I.P.O. prospectus, Mr. Khosrowshahi will personally net stock bonuses of more than $100 million.

© 2019 The New York Times News Service