The Strategist

Japanese SoftBank to buy a fifth of Uber with a big discount

12/29/2017 - 09:59

Japanese company SoftBank won a tender to purchase a 20% stake in Uber, the Wall Street Journal reported citing sources. At that, Uber was estimated at $ 48 billion. This is less than the company’s market cap of $ 70 billion. Thus, SoftBank will receive Uber shares at a discount of almost 30%.

According to the publication, the deal will be held at a big discount - almost 30%. SoftBank Group Corporation plans to buy back Uber securities belonging to a group of investors and employees of the company itself.

The total value of Uber is estimated at $ 48 billion, the newspaper writes. As part of the transaction, SoftBank will invest at least $ 1 billion in Uber.

"We look forward to working with investors to close the overall deal... This agreement will help strengthen our growth," Bloomberg quotes Uber as saying.

A source says that the consortium Dragoneer Investment Group led by SoftBank will receive about 17.5% of Uber. As part of the deal, the Japanese company will also invest about $ 1.25 billion in the taxi service. According to other sources, Softbank will receive a 15% stake, another 3% will be transferred to the consortium.

Reuters reported that Uber will expand the number of board members from 11 to 17, restrict the right to participate in the voting of some shareholders and reduce the role of the former head of Uber Travis Kalanick in service management.

Many investors can get a huge profit by accepting Softbank’s offer. Thus, the Benchmark Capital Fund was one of the first to provide the company with financing of $ 27 million, and now the value of its stake in Uber is estimated at $ 8 billion.

However, several large investors privately reported to the publishers that they would refuse to sell if the proposed price was too low. Former CEO Travis Kalanick, who owns about 10% of Uber shares, made it clear that he would not sell his share.

In case of success of the Uber transaction, serious changes are expected in the management structure. In particular, SoftBank intends to introduce 6 new directors to the company's board of directors. In addition, the support of such a large partner can contribute to the stabilization of the company's operating performance.

The demanded discount is a reaction to the recent scandal with the theft of Uber customer data. As Bloomberg reported, the incident occurred in 2016. During the cyberattack, the names, email addresses and mobile phone numbers of 50 million Uber users worldwide were stolen.

The hackers also got possession of data of 7 million taxi drivers, including driver's license numbers. At the same time, representatives of Uber assured that information about credit cards and travel routes remained classified.

First, hackers got access to the Uber repository on GitHub. Then, with the help of company employees' credentials, the attackers entered Amazon Web Services, which Uber used to handle computational tasks. In the vault, hackers found an archive with information about passengers and drivers. After that, they sent a letter to Uber with a demand for a cash ransom, writes Bloomberg.

According to the agency, the company agreed to pay hackers for removal the data received and non-disclosure of information about the incident. Travis Kalanick, who at that time held the post of general director of Uber, learned about the incident in a month, in November 2016. However, he also did not disclose this information and did not apply to law enforcement. Kalanick refused to answer journalists' questions.

Yet another probable reason of why the Japanese asked for a discount is the taxi service’s loss. Uber Technologies in the III quarter increased its loss by more than a third compared to the previous three months, according to the company's unaudited financial statements. Net loss rose to $ 1.46 billion compared to $ 1.06 billion, while revenue fell to $ 2.01 billion from $ 1.65 billion.

The company's gross volume of orders, including food delivery services, was $ 9.71 billion in July-September, compared to $ 8.74 billion in the second quarter. Uber is a private company, so it may not disclose the financial statements completely. In late August, for example, it provided data only on the amount of adjusted loss (excluding tax and interest payments) for the II quarter.

Adjusted loss in the third quarter increased to $ 734 million compared to $ 645 million in the previous three months.