Softbank Group Corp. offers to buy a stake in Uber Technologies Inc. at a 30% discount to the company’s most recent valuation of $68.5 billion.
The investment deal, which was approved in October by the Uber board, would activate a series of governance changes at the ride-hailing company including the expansion of the board members from 11 to 17, limiting voting powers of some early shareholders and cutting the influence of former CEO Travis Kalanick.
The investment supported by the new CEO Dara Khosrowshahi is a chance to close rifts and land a powerful new ally. The major ‘board moves’ and the investment came at the end of an abysmal year of scandals, including a resign by former CEO and the company’s announcement that the executives covered up a major hack in 2016.
Softbank along with a group of other investors will be acquiring at least 14 percent of the Uber shares from existing investors. Sources reveal that the tender offer will likely start on Tuesday and the investors will have a time period of one month to respond.
Two of the added board seats will be acquired by the Softbank-led consortium while the remaining four will go to independent directors.
Although a number of investors have agreed to sell their shares, Softbank can still walk away from the deal if there aren’t enough interested sellers. The Japan-based Softbank is expected to make a separate investment worth $1billion at the current $68.5 billion valuations.
Even at the discounted price, the San Francisco-based transportation company is the second highest valued private venture-backed ride-hailing company, after China’s Didi Chuxing.
The offer introduces a big chance for existing investors and employees to lock in significant profits and to unlock value which was till now difficult to realize. Only, shareholders and employees having 10,000 shares or more are eligible to sell.
Khosrowshahi said that he plans to take the company public by 2019 while Phil Haslett, Co-founder and head of investments at secondary marketplace EquityZen said that the 30 percent discount is steep, given Uber’s future public offering. Usually, cuts in valuation occur when there is a risk that the company might be sold at a heavy discount, which in Uber’s case isn’t any.
“It really comes down to a pre-pricing of Uber’s value,” said Haslett.
Since it was valued at $68.5 billion more than a year ago, Uber had had a pretty challenging year handling a number of scandals, including sexual harassment accusations. The company had undergone federal criminal investigations into its software used to deceive regulators and has suffered from allegations of paying bribes to authorities in Asia. It had also seen lawsuits with Alphabet Inc’s autonomous van Waymo, after being accused of stealing Waymo’s secrets.
Most recently, Uber revealed that it had concealed a hack that stole personal data from 57 million customers and 600,000 drivers, more than a year ago. Two hackers were paid $100,000 by the company to delete the stolen info. The scandal raised questions about the Softbank-Uber deal, whether it will be affected or not. Uber announced that Softbank was informed about the data breach before the public was informed, however, a source familiar with the matter confirmed that Softbank had already negotiated with Uber regarding the scandal.