Uber’s MEGA deal
Recently, Uber and Softbank struck a multi-billion dollar deal with SoftBank. This is one of the largest private startup deals ever. SoftBank, a well connected Japanese tech company will a total investment of $10 billion. Along with Dragoneer Investment Group and General Atlantic. This can be like pushing a reset button for Uber after more than two years of bumpy roads.
SoftBank will invest between $1 to $1.25 billion in Uber at its current valuation of $68 billion (How is it still a startup?!) As the taxi-hailing company doesn’t have any shares lying around for SoftBank. They’ll proceed with a tender offer to buy 17% of stocks worth up to $9 billion from the current shareholders. The price for the stock sale is expected to be lower than current valuation. But the good thing is, SoftBank will buy all the shares at a single, fixed price. Conditionally, sellers don’t work together to push up the price of the stocks.
“We’ve entered into an agreement with a consortium led by SoftBank and Dragoneer on a potential investment.” – Uber
How it’ll go
Uber plans to run several newspaper Ads, notifying the investors about the share purchase. Then SoftBank will propose a price to buy the stocks. According to the offer, the shareholders can decide whether they want to sell their stocks or not. If yes, then how much of it? If the number of shareholders willing to sell is low. SoftBank can either propose a higher price or just walk away. (I hope I had that option in my life.)
This deal can cause massive ripples throughout the company. For instance, the major hurdle in this deal was the Benchmark lawsuit on Uber’s former Chief Executive Officer Travis Kalanick. Urging to take back the control of the board seat and throw him out of the board. Kalanick said that he’ll only approve the deal if Benchmark agreed to drop the lawsuit. After the pressure from other board members, including Uber’s new CEO Dara Khosrowshahi Benchmark finally agreed. They’ll keep the lawsuit on hold until SoftBank’s investments kick in and governance changes are placed.
“We believe this agreement is a strong vote of confidence in Uber’s long-term potential. Upon closing, it will help fuel our investments in technology and our continued expansion at home and abroad, while strengthening our corporate governance.” – Uber
The Equalizer
The shitshow in the past can be cleared up. Ranging from the resignation of Kalanick, sexual harassment and discrimination allegations. The ouster of several top executives and multiple federal criminal probes. The investment can open new signs of a merger or deal with Uber’s Indian rival Ola. As SoftBank is also a major investor in Ola.
One of the major goals of the deal was equalizing the power of different share classes. And Kalanick must have majority approval if he ever wanted to replace board seats he controls. Currently occupied by Ursula Brown, the former Xerox CEO, and former Merrill Lynch CEO John Thain. The board size will be increased to 17 to add new independent directors. This deal can lead Travis Kalanick to be a billionaire IN-CASH. Also many more San Francisco millionaire as employees sell their shares. Who wants to be a millionaire, eh?
If you had a share in Uber right now would you sell it? Or keep it to see how to self-drive cars project goes? Comment down below to let me know!