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Uber investors sell to SoftBank at big discount, but still make billions

Even though they sold at roughly a 30 per cent discount from what the shares were worth in 2016, those who invested early made nearly 100 times their initial stake

AP | PTI  |  Detroit 

Uber Quarterly results
Uber said it lost $645 million in the second quarter, 9 per cent less than the $708 million loss in the first quarter

Investors in the ride-hailing service didn't get all they wanted in selling at least part of their holdings to a group led by Japanese

But don't show them too much sympathy.

Even though they sold at roughly a 30 per cent discount from what the were worth in 2016, those who invested early made nearly 100 times their initial stake, going from around 35 cents per share to just under $33, according to one investor who requested anonymity because the sales are private.

was valued around $68.5 billion during a 2016 capital investment, but it dropped to somewhere above $48 billion in the deal announced last week.

The reasons for the discount are many, among them the seemingly endless string of scandals, lawsuits and fights that plagued through almost all of 2017. Also, competition has gotten tougher from and in the US as well as Ola in and several emerging services elsewhere.

During the past year, Uber has been rocked by revelations of rampant sexual harassment in the company, technological trickery designed to hinder regulators, and a yearlong cover- up of a hacking attack that stole personal information of 57 million passengers and 600,000 drivers.

Rohit Kulkarni, of SharesPost, a company that analyzes private company investments, says three big events that happened around the time that began courting investors combined to discount the

Just before SoftBank's intent to shop for was announced, regulators in refused to renew the cab- hailing app's license to operate. Then the data hack and cover-up were revealed, and the company told investors its third-quarter net loss had widened to $1.46 billion on huge legal costs.

The events helped SoftBank's group get a better deal, Kulkarni says.

Many big Uber investors include that got in early. They hedged their bets, selling part of their stake to bring big profits to their shareholders while holding the rest for big gains if the company gets past the scandals, the investor said.

"This is still a good deal," said Gartner "The earlier the investment, the bigger the payout." All-in, the will pump about $9 billion into Uber, including $1.25 billion in new shares that were purchased at the 2016 valuation. SoftBank acquired about 15 percent of Uber, while other investors in its group got around 3 per cent.

The deal, due to close this month, also brings management stability to Uber, reducing the influence of SoftBank, which has global investments in other ride-hailing companies, gets two seats on the board and will help Uber navigate the tough global competition, says Kulkarni.

First Published: Wed, January 03 2018. 10:53 IST
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