Tensions at Uber are rising as SoftBank is moving forward with its idea to negotiate a major investment in the San Francisco, California-based company, recent reports indicate, with the main point of contention between the two supposedly being Uber’s valuation. While the company’s major shareholders are largely diversified in terms of their backgrounds, their board representatives are also relatively unified, save for the one which is currently suing Uber’s co-founder for fraud. Due to that state of affairs, it’s still unclear whether SoftBank will be able to persuade enough investors to sell their stakes in the ride-hailing service provider, especially as the company’s massive investment comes with a notable provision – a large discount.
According to people with knowledge of the matter quoted by The Wall Street Journal, Uber’s Board of Directors still hasn’t officially responded to SoftBank’s proposal after considering the investment for approximately a month. If SoftBank is successful in its endeavor to make some of Uber’s shares change hands, it could end up with as much as 22 percent of the company, insiders said, adding that the Japanese conglomerate is seeking to purchase the shares based on a price that’s more than 30 percent lower than Uber’s last private valuation which was close to $70 billion and made the American company the most valuable startup on the planet. Uber’s last valuation put the company’s worth at approximately $68 billion, indicating that SoftBank is looking to value it at closer to $45 billion if it’s to go through with its investment. Under those circumstances, a potential acquisition of more than a fifth of the firm could even surpass $10 billion, provided that Uber’s shareholders manage to negotiate a 30 percent discount with SoftBank instead of an even steeper one.
Despite SoftBank’s aggressive approach and related caveats, some of Uber’s major investors may be tempted by the proposal as it would allow them to cash out while the firm is still being touted as the most valuable startup in the world, which is a title that not everyone believes will stay with Uber in the long term as the company continues to struggle on numerous fronts. Uber is currently under three federal investigations and is facing a high-profile and entirely public legal battle with Alphabet’s Waymo over alleged trade secret theft which is moving to trial next month. Cashing out on SoftBank’s interest in the company may be seen as a sensible decision by some investors who could be ready to cede their board seats at Uber, of which the Japanese conglomerate wants to add two, insiders claim. SoftBank’s proposal would see Uber go up to 11 directors, though a pending lawsuit initiated by the firm’s investors Benchmark is seeking to legally cancel three of them.
A major stake in Uber would put SoftBank at the forefront of the ride-hailing revolution which its Chief Executive Officer Masayoshi Son previously described as world-changing; SoftBank previously invested in Chinese ride-hailing startup Didi Chuxing and an operationally similar company Grab which operates in Southeast Asia, in addition to revealing that even if it doesn’t invest in Uber, it will attempt to go through with purchasing a stake in its main domestic rival Lyft. The company is now said to have already met with Lyft earlier this month, but their talks on a potential investment supposedly never left a highly informal stage for unknown reasons.
Due to the current state of affairs, SoftBank may try to appease to minor investors in Uber in hopes of securing enough shareholders willing to sell their stakes at a discount, though the potential for such a scenario to be successful is still unclear, with Uber not being a publicly traded company and hence not having a vast number of individual investors. Some current stakeholders reportedly remain unwilling to sell portions of their investments to SoftBank as they fear such a significant devaluation will hurt the company’s future prospects, especially as Uber is now nearing an initial public offering which its new CEO Dara Khosrowshahi said he’ll seek to organize in as little as 18 months to three years. If the Japanese conglomerate is successful in its efforts to secure a major stake in the ride-hailing giant, it would also pump $1 billion in cash into the company at a minimum, with that particular sum being meant to offset its discounted acquisition and diminish its potential negative impact on Uber’s valuation, people familiar with the company’s proposal said. Uber’s negotiations with SoftBank could be concluded by next week, recent reports indicate, with the firm‘s board now supposedly being entirely focused on the talks following its successful search for a new CEO who officially replaced ousted co-founder Travis Kalanick earlier this month.