These days, it seems like everyone wants a piece of Uber, the popular transportation app where regular drivers chauffer others around for a fee. Although Uber’s reputation isn’t as sterling as it once was, especially compared to similar apps like Lyft, Japanese tech firm Softbank is still interested.
The company is so interested, in fact, that they’re looking to invest $10 billion into the ridesharing enterprise. This latest news comes from the Wall Street Journal on Thursday, September 14th.
That investment translates to a 22% stock in Uber, or it will if the deal is finalized. Such a deal would give SoftBank share-purchasing power from both Uber stockholders and Uber itself. Not only that, but SoftBank would be a part of Uber’s board. The rideshare company already has nine sitting directors, but two of them would have to vacate their seats to SoftBank staff per terms of the deal.
While bigger companies swallow up smaller ones all the time, this move would be significant because of the price that SoftBank is looking to put forth. While $10 billion seems like quite a substantial sum, it’s still about $40 billion short of Uber’s true value, which is being estimated at about $50 billion through auction. Even that may be low. Some are valuing Uber even higher, pricing it at around $68 billion. That means SoftBank would swoop in and grab Uber for not even half of its true value.
Again, this could have to do with the aforementioned reputation that continues to haunt the ridesharing company. According to Fortune, early in 2017, a sexual harassment allegation came to light from an ex-Uber employee. Then it was discovered that Amit Singhal, Uber’s Senior Vice President of Engineering, had a past of sexual harassment allegations. He stepped down from his role shortly thereafter.
Amidst growing dissension with Travis Kalanick, Uber’s Technologies Chief Executive Officer, employees began leaving left and right in spring, including the company’s security researcher, vice president of product and growth, and even the company’s president.
By this summer, Kalanick exited the company as well. Dara Khohrowshahi, the former CEO of Expedia, has since taken over Kalanick’s role.
While it’s understandable, then, why SoftBank wants to get such a discount on Uber, it’s hard to say if the deal will go through. After all, the negotiations for such a deal have been going on all summer with no agreement made yet. In late July, CNBC reported that the deal would not transpire, calling it “dead.”
At some point during the summer, talks ramped back up. The company has been busy obtaining other worldwide companies in the same vein, such as Grab, a Singaporean service, Chinese company Didi Chuxing, and India’s Ola.
Two billion dollars alone went into Grab, which Didi Chuxing and SoftBank purchased in tandem.
So what’s with the obsession over ridesharing companies? Masayoshi Son, the Chief Executive Officer at SoftBank, has a personal interest in this chauffeuring service. According to an article published on Fox Business, Son has explained that ridesharing “companies like Uber will transform the world.”
Those who already have shares in Uber and would be personally affected by SoftBank’s Uber purchase aren’t as excited about the idea as Masayoshi Son is. Within a little more than a year from now, Uber may become an initial public offering. A huge purchase like the one SoftBank proposes could lower the stock prices of Uber just when they are starting to recover after this year’s string of unfortunate events.
“It is better for SoftBank if there’s healthy competition in the ride-hailing market,” explained Canalys analyst Rushabh Doshi.
As of now, it’s still uncertain what Uber’s leadership will decide, and whether the company will want to go through with the deal. In a way to cover its bases, so to speak, Fox Business reports that SoftBank has also struck up conversations with Lyft about a potential deal, although that’s just in the discussion stages and may never move past that.
Wall Street Journal has hinted that next week, both SoftBank and Uber could finalize a decision about whether the deal will go through. It’s certainly a great prospect for SoftBank, but how beneficial the negotiation would be for Uber is as yet unknown.
Regards,
Ethan Warrick
Editor
Wealth Authority
