Uber is planning a new round of fundraising that would at least match the $68bn (€58 billion) peak valuation it reached before this year’s round of scandals - though investors who take part would be able to buy into the ride hailing company at a lower overall price than the headline number suggests.
The unusual arrangement, confirmed by two sources, is designed to help Uber maintain that it has not fallen from the high-water mark set by its last investment round more than a year ago, despite the upheaval from a sexual harassment scandal this year that has gutted its senior executive ranks.
The plan would include a secondary sale of shares by existing investors at a current market valuation that is likely to be some way below $68 billion.
The fundraising plan is part of an attempt by Uber's board to bring more stability to the company's shareholder base as it tries to recover from the departure of founder Travis Kalanick as chief executive officer.
Pairing it with a secondary share sale would also give existing investors, including employees, a chance to cash in part of their holdings at a time when the chances of an initial public offering in the near-term appear to be receding.
It could also reduce the influence of venture capital firm Benchmark, which owns 13 per cent of Uber’s stock and earlier this month mounted a high-profile lawsuit against Mr Kalanick.
The sale by Uber itself would raise around $1 billion and be set at or above the valuation Uber achieved in June last year, when it sold a 5 per cent stake to Saudi Arabia for $3.5 billion. The secondary share sale, on the other hand, would be for as much as $10 billion, and would reflect a market price that took into account the company's struggles this year.
To enable Uber to sell the higher-priced shares, investors who bought in would be offered the chance to buy the secondary stock on a pro-rata basis, resulting in an average price per share at a discount to the headline valuation.
Saudi Arabia
The arrangement - showing that Uber itself could still raise some money at the $68 billion valuation - would save face for Saudi Arabia, which would otherwise be seen as having overpaid for its stake in the company last year, according to one person familiar with the plan.
Another person said that the structure would also save other Uber investors from being forced to write down the value of their existing holdings. Writedowns normally follow a so-called “down round”, when a private company raises new money at a lower valuation than it did before.
They may not avoid a writedown, however, if the average price paid by investors is taken as a yardstick for the company’s present value.
Details of the share sale are being hashed out with the aim of putting a formal offer to all Uber shareholders who are eligible to sell some of their shares some time next month, according to one of the people.
The plan is likely to be complicated by Benchmark’s lawsuit, which challenges Mr Kalanick’s influence over the board and throws its current governance arrangements into question. The revolt has also hampered Uber’s search for a new chief executive.
Copyright The Financial Times Limited 2017