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SoftBank Bids For Uber Shares At 30 Percent Less Than Current Valuation

Softbank and a group of investors have reportedly made an offer to buy a significant amount of Uber shares, but at a considerable discount. The offer from the Japanese bank-led consortium is valuing the ride-sharing firm at $48 billion, around a 30% discount to its latest valuation of $68.5 billion, says Reuters, citing a person familiar with the matter.

Taxi Uber shares
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Uber in a Yahoo-like situation

Uber is keen to get an investment from Japan’s SoftBank. Uber’s CEO Dara Khosrowshahi sees this as a bright opportunity to get a powerful new ally, something that the company badly needs. The year 2017 did not go very well for Uber with co-founder and former CEO, Travis Kalanick, stepping down under pressure and the company accepting that it failed to reveal about the hack that leaked 57 million customer’s and driver’s data.

Baffled by the revelation, regulators and lawmakers are pressing charges against the ride-hailing app. On Monday, Illinois and Chicago jointly filed a lawsuit against Uber for the data breach. Senator Richard Blumenthal, a Democrat from Connecticut, stated that the matter should go to the Federal Trade Commission (FTC) and an appropriate fine should be levied on Uber, notes The New York Times.

Uber is also facing questions if the data breach happened outside the U.S. as well. According to Reuters, Mexico’s National Institute of Transparency, Access to Information and Protection wants to know the number of affected people in their country, and the steps taken by Uber to control the damage.

When Yahoo was engulfed in their data breach issue, Verizon picked up the company at a $350 million discount. Uber’s current situation is not very different from Yahoo’s as SoftBank is also making a discounted offer. Stating that there are similarities between Uber and Yahoo, Scott Vernick, a Philadelphia lawyer specializing in technology, privacy and data security said the Japanese bank will use it as “leverage” in the valuation, according to The Mercury News.

Will investors sell Uber shares at a discount?

Uber employees who own at least 10,000 of vested share will be eligible for sell, notes TechCrunch. Other investors such as venture capitalists, former employees, as well as, angel investors could also be eligible to unload their shares. The SoftBank-led coalition is reportedly planning to acquire at least 14% of Uber shares. The purchase, along with a direct investment of $1 billion, would make the group one of Uber’s biggest shareholders, notes Bloomberg.

If a large number of shareholders do not agree to sell at the offer price, SoftBank could either up the offer or just walk away. The success of the deal hinges on the major shareholders and early investors such as First Round Capital, Lowercase Capital, Menlo Ventures, and Google Ventures along with the founders Garrett Camp and Travis Kalanick. Ousted CEO Travis Kalanick reportedly has no plans to sell anything from his 10% ownership of the company.

Even though SoftBank is making the offer at a 30% discount, many early investors are set to gain. The tender offer is likely to go live Tuesday. Although many of Uber shareholders have agreed to sell the shares, it could take as many as 20 business days to complete the process, says Reuters.