Coverage: Uber gets a valuation cut with new cash

SoftBank Group Corp. and a coalition of investors will offer to buy shares in Uber Technologies Inc. at a price that would value the ride-hailing company at 30 percent less than its most recent $69 billion valuation.

Eric Newcomer of Bloomberg News had the story:

In addition to its tender offer to existing Uber shareholders at a $48 billion valuation, the Japanese technology conglomerate will invest at least $1 billion in Uber at its $69 billion valuation, said the people, who asked not to be identified discussing the private terms of deal.

The price moves Uber a step closer to executing one of the largest private stock sales ever. The expansion of the ride-hailing company’s board and a number of other governance reforms have been attached to passage of the stock deal, upping the stakes. Locking in the investment from SoftBank has been a top priority for new Uber Chief Executive Officer Dara Khosrowshahi.

The deal isn’t done, however. Shareholders will need to sell at the $48 billion price. While it’s 30 percent less than the current valuation, the offer would represent a significant windfall for many early investors. If shareholders don’t agree to sell in sufficient numbers, SoftBank could raise the price or walk away.

Ethan Baron of the San Jose Mercury News reported that Uber’s recent hack and coverup give SoftBank leverage:

Thanks to the data breach, and Uber’s disclosure that it paid the hackers $100,000 to destroy the data and waited more than a year to tell customers and drivers about it, Uber faces legal and regulatory costs. SoftBank can cite those expenses as reasons for offering a lower per-share price than if the breach hadn’t happened, Vernick said.

So far, Uber is facing two class-action lawsuits over the hack and its response, along with a Federal Trade Commission probe and aggressive criticism from federal lawmakers. U.S. Senator Mark Warner, in a letter Monday to Uber CEO Dara Khosrowshahi, focused on the security lapse, and on Uber’s $100,000 payment to the hackers.

“It appears the motivation behind this payment was principally to prevent the public or authorities from learning of the breach,” Warner wrote. “What rationale was provided by senior executives for covering up this breach?”

In another letter, four powerful senators, including finance committee chairman Orrin Hatch and transportation, commerce and science chairman John Thune sent a letter Monday to Khosrowshahi calling the breach “a serious incident that merits further scrutiny.”

Theodore Schleifer of Recode reported that SoftBank will buy stock from employees and early investors:

The likeliest group of sellers are early employees — assuming they have more than 10,000 shares — many of whom are expected to part with at least some of their positions. The program would look similar to Facebook employees’ cash-out to Digital Sky Technologies in 2009. But Uber employees’ shares together only add up to a few percentage points at best.

And later investors, who bought shares of Uber at a valuation higher than $50 billion, are unlikely to want to book a loss and sell.

So that’s why the deal largely rests on a half-dozen of the company’s biggest owners and earliest backers. Those powerhouse investors include Benchmark, First Round Capital, Lowercase Capital, Menlo Ventures and Google Ventures, as well as key Uber players, most especially founders Garrett Camp and Kalanick.