According to the latest reports, Japan’s SoftBank Group Corp. is offering a bid to buy shares of Uber Technologies Inc. at a 30 percent discounted rate. Currently, Uber is valued at $68.5 billion, but Softbank wants to buy the shares of Uber at a valuation of $48 billion, which is roughly a 30 percent discount to its current valuation. If the deal gets finalized, then it would become one of the largest purchases of stock in a private company.
This new investment was approved by the Uber board in October, and for new Uber Chief Executive Officer Dara Khosrowshahi, the investment with Japan’s SoftBank has been a top priority as he sees the deal as an opportunity to close rifts and establish a powerful new ally.
Uber has been under controversies since the starting of this year including the resignation of co-founder and former CEO, Travis Kalanik. Also along with that, the company also admitted that it covered up a hack that exposed personal data of 57 million customers and drivers. Kirk Boodry, an analyst at New Street Research, said that SoftBank’s expectation that it can get shareholders to part with their shares at about $50 billion has built all the negative news and all of this over the past year has contributed to the downside in case of Uber.
The new deal might see some governance changes and also it will increase the number of board directors from 11 to 17. The SoftBank-led investor group will acquire two new board seats, and the rest four seats will be taken over by independent directors. The consortium of investors led by SoftBank and Dragoneer Investment Group is expected to take at least 14 percent stake in Uber.
As per the sources, the tender is going to be launched on Tuesday, and the investors will be getting around a month’s time to respond to the deal. Apart from this group based deal, SoftBank is also expected to make a direct investment of $1 billion with the ride-services company. If the deal becomes successful, the SoftBank would become one of Uber’s biggest shareholders.
The year 2017 has proved to be a great year for Softbank as it raised about $93 billion this year, the largest technology investment fund ever. As per the data provided by Pitchbook Inc SoftBank’s latest bid offer is close to what Uber was worth in 2015 when shares were priced a little less than $40 apiece for a $51 billion valuation. But according to Phil Haslett, co-founder and head of investments at secondary marketplace EquityZen, the 30 percent discount is steep given Uber’s plan to launch an initial public offering in 2019. “Usually valuation cuts of this size happen when a company is at risk of being sold at a heavy discount, which Uber is not. It really comes down to a re-pricing of Uber’s value,” said Haslet. The upcoming 20 to 30 days are going to be very crucial for Uber as well as Softbank, and it remains to whether the deal will become successful or not.