Early shareholders gain liquidity, Softbank gets cheap stock, and the market gets some bullish signals on Uber in the form of Softbank's backing. From the outside it looks like a pretty good deal. Of course there might be internal panic and I've got it all wrong, but I see some big wins for both parties.
If SoftBank went in with eyes open, this seems business as usual. If they're rushing after the cool kid on the block, then this starts to sound like Theranos 2.0.
They are structuring a deal that is advantageous to themselves, exploiting Benchmark’s desire for an exit so they can pay its investors their returns.
SoftBank is getting extremely cheap debt at the moment, so it makes sense to take advantage of shareholder turmoil to get valuable companies at a discount. With this purchase, SoftBank will have a hand in every significant ride sharing other than Lyft.
Does that imply that they'll be buying Benchmark's stock, rather than employees'?
> SoftBank is getting extremely cheap debt at the moment
That sounds like some interesting background to the deal, please expand if you have more detail!
I'm bullish on SoftBank, but it's indisputable that it's gotten a hell of a deal. The upside for the banks is they get their principal + interest back. The downside for the banks is that they lent the cash at low-risk rates for high-risk assets.
Agreed, this statement was probably a little strong. But certainly it doesn't represent a new $48B valuation as the article suggests.
I suppose I'm objecting to the implied suggestion that Uber is having a down round (a few other commenters have jumped on that) because of the negative public sentiment they are copping at the moment. It's not like Uber needs cash right now, and I really doubt the board would approve a deal which brought their valuation down for the sake of money they don't need.
btw, $2.94B = $6.72B * (69/48) - $6.72B --> I believe thats SB's nominal gain on paper the minute the deal closes.
I'm sure the liquidation preference (presumably 1x?) is worth something, but is it worth a 5-10-20-30% discount? At Uber's current valuation, the preferred would convert anyway so the liquidation preference would not be relevant
Edit: saw that the total investment is slated to be $10B, with $1B invested at the $69B valuation and the rest presumably in common shares at a 30% discount. It could be true that this does not represent a decrease in valuation, but there is reason to believe that the overall valuation is a step down. Devil in the details