It’s been more than three weeks since Uber director Arianna Huffington said a deal for a massive investment from Japanese conglomerate SoftBank was “very likely” to reach an agreement on the starting price within the next week, Recode reports. Since then SoftBank has even hinted it might go for an investment in Lyft instead. Only to put pressure on the negotiations with Uber?
Since Huffington’s statement, October has become November — and the parties appear no closer to kickstarting the stock sale designed to soothe tensions at the world’s most valuable private company.
The big question: Is the multi-billion dollar deal in which SoftBank is trying to acquire 14 to 20 percent of the ride-hailing company in trouble? Or is the slowdown just routine haggling over dollars and cents?
According to people with knowledge of the process, it’s mostly the latter, with the main stumbling block still revolving around price. Existing Uber shareholders are insisting on a price per share that far exceeds the $50 billion valuation currently under discussion, with one possible seller arguing for a price of at least $40 per share, or around a $60 billion valuation.
“We’re very valuation sensitive. We’ve walked away from a number of deals recently because we didn’t like the valuation,” said Jeff Housenbold, a chief dealmaker at SoftBank, as he discussed its investment strategy more broadly at a conference Wednesday.That said, he noted: “In the grand scheme of things, if we have a belief that this could be the next $400-billion company, arguing over a pre-money valuation of $1.8 billion or $1.9 billion isn’t really that relevant to us.”
In the case of Uber, $40 per share would merely be the starting point for the tender offer — a price that would gradually increase in a type of auction if there aren’t enough sellers at a given price.
Mutual funds such as Fidelity that own Uber shares have not changed their own internal valuations of its stock, as they disclosed in new filings this week. Currently, different funds value the company between $41 and $49 a share.
The price of the deal is also key since it would serve as the guiding price of any future secondary transactions, one investor said. Under its old CEO, Travis Kalanick, Uber cracked down on existing investors who tried to sell their ownership positions, which is not likely to be as rigid in the future.
One possible idea floated in recent weeks — but shut down — has been a “tiered pricing” scheme. In that scenario, sellers who sell a higher volume of their shares would be able to sell shares at a higher price than those who render a smaller amount. That’s not typical in a tender offer process, which generally requires all buyers and sellers to transact at the same pricing point.
There are other issues to settle, including the explosive lawsuit filed by Benchmark Capital — which owns more than 10 percent of the company and has a board seat held by Matt Cohler — against Kalanick, whom the venture firm helped oust and has been trying to restrain.
Some on the board have assumed that Benchmark will drop the lawsuit as part of the funding deal with SoftBank.
The deal would seem to obviate the need to restrain Kalanick with a lawsuit, but sources said that Benchmark has not unconditionally agreed to drop their legal claims as part of a grand bargain. And the venture capital firm has also hired a transaction attorney to advise them on how to navigate the Uber drama.
The suit was sent to private arbitration by a Delaware judge more than two months ago, but an arbitrator had not yet even been named as of last week.
• Will SoftBank go for Uber or for Lyft and when?