The board at Uber, which is planning an initial public offering in 2019, made their final concessions to pave the way for the SoftBank deal in early November. The deal, concluded on January 18, includes a large purchase of shares from existing Uber investors and employees at a discounted valuation for the company of $48 billion, a 30 percent drop from Uber's most recent valuation of $68 billion.
The SoftBank-led consortium includes SoftBank, Dragoneer Investment Group, TPG, Tencent Holdings Ltd. and Sequoia Capital. They have reached an agreement to buy more than 17 percent of Uber for about $9bn, after shareholders decided to cash out their shares to make room for Softbank. For example, co-founder and former CEO Travis Kalanick sold a third of his 10% stake in the company to SoftBank, yielding him $1.4 billion. The investment by the SoftBank-led consortium is comprised of two tranches. The consortium will buy about $1.25bn of new Uber shares at the same price as the company’s most recent fundraising round, which valued it at $70bn. The group will also buy a second, larger tranche of discounted shares from Uber’s existing shareholders, at price of $32.93 per share, which is a 30 percent discount to Uber’s previous fundraising. In all, SoftBank itself will take a stake of 15 percent, becoming the company's largest shareholder. The investment triggers a number of governance changes at Uber, including the addition of new board members, which take effect immediately. SoftBank has added two representatives to Uber's board of directors: Rajeev Misra, who is chief executive of SoftBank's Vision Fund, and Marcelo Claure, Sprint Corp, president and CEO and a member of SoftBank's board of directors.
The investment came at a critical time for Uber, and it was much needed. This year, Uber faced a politically motivated boycott, employee claims of sexism, a high-profile lawsuit over trade-secrets theft, a ban in London, and the downfall of its CEO Kalanick. Hence, the SoftBank investment is a victory for Uber’s new CEO, Dara Khosrowshahi, who took over in September. The negotiations over the deal proved tense as at one point, SoftBank CEO Masayoshi Son even publicly proposed investing in Uber’s U.S. competitor, Lyft Inc., if the deal talks fell through.
Meanwhile, Softbank is everywhere in tech, disrupting the whole VC industry since it has the largest technology investment fund ever. Reports initially described its Vision Fund as a VC vehicle, but it’s officially classified as private equity. This Vision Fund is backed by sovereign nations Saudi Arabia and the United Arab Emirates as well as tech giants including Apple, Qualcomm and Sharp. Having raised $93 billion so far, dwarfing even the largest buyout funds, it can invest game-changing amounts in almost any company or industry. In October, the CEO Masayoshi Son reported that the fund had pulled in $3 billion worth of profit and earned a 22% return since it began investing in companies. The fund, which has already spent its $35 billion, is expected to be used in emerging fields such as IoT, AI, robotics, computational biology, cloud technologies & software, financial technology, and more.
I believe that Softbank will continue creating tremendous value in the market, and with its strong roots and outlook towards the next 300 years, it will create significant growth in the companies that it operates in. Although it will become a foe for other funds and investors, it seems as it will become a hero for tech companies looking for investments.
Figure: SoftBank’s Vision Fund Investments