This. It’s not uncommon to price the common shares differently in tender offers. Facebook did almost the same thing in 2009: DST bought preferred share at $10B valuation and then tender offer at 6.5B [1]

[1] http://kara.allthingsd.com/20090713/facebookers-start-cashin...

> It’s not uncommon to price the common shares differently in tender offers

This tender was not restricted to common stockholders. Some preferred stockholders, who bought in recent rounds, sold down or flat. Practically nobody, if not absolutely nobody, who tendered common stock to DST in 2009 lost money on their original investment. The same isn’t true with Uber.

Indeed, they're investing at the 70B valuation and buying existing shares through the tender offer, at a discount.

Given that the latter shares are being sold by existing stockholders, it doesn't seem fair to call this a down round.

I'd expect their valuation to remain the same.

If the valuation didn't change, and the common stock is fairly priced, then we should stop calling the valuation $70B. Under that model, Uber was never worth $70B.

No, that's not how that works. The preferred share and common share prices converge towards a liquidity event, like an IPO, when preferred shares are converted to common shares.

It's expected that common shares are worth less than preferred shares. After all, the preferred shares could be paid out at value in, e.g. in the event that the company is sold for far less than the current valuation, and the common shares would be worthless.

Common stock is worth less than preferred. Most stock is not preferred. Therefore there was never $70B worth of Uber stock in existence.

Your argument has obvious merit, but the standard is to report on the preferred price, not the common price.

It's a de facto standard because markets for common stock generally don't exist for private companies. If you're comparing Uber against AirBnb it makes sense to compare valuations based on preferred stock, if you're comparing them to anything in "the real economy" or are interested in the value someone has placed on the company as a whole it's less clear which number is more useful.

> markets for common stock generally don't exist for private companies

There is a thriving, if shallow, secondary market for the private stock, common or preferred, of companies like Uber.

Agreed that the press does go around using this $70B number as a valuation. If the company IPO'd at less than $70B it would similarly be reported as a dud. Recruiters also use the $70B when offering stock options. And I'm sure it feels like a haircut to those employees who just sold their stock at a $49B valuation.

> I'm sure it feels like a haircut to those employees who just sold their stock at a $49B valuation.

Probably not. The strike is likely at a much larger discount.

All of the employees who sold in this tender offer have options, which have a maximum strike of less than $20 per share for common stock. Only RSUs were issued after early 2015. Uber’s valuation was $40B then.

I've only got two IPOs under my belt, but both cases the 1st trade settled above the preferred price in the last round. I think that's fairly typical, fwiw.

Having the stock after IPO trade at the old preferred price represents a significant increase of the actual value of the company, even though it's not usually reported as such.

i agree with you, but its the way that private company valuations work in the valley. If you read an article that says company X raised a round at Y valuation, its always based on the preferred price.

The number of times this exact mistake is made on headlines about Uber makes me wonder if it isn't being made maliciously.

> Feels a little clickbait-y to say the valuation took a haircut when we're talking about different classes of stock

An investor from March 2016 Series G would have sold, to SoftBank, at a lower price per share than that at which they invested. That’s a haircut.

Pricing for preferred versus common, or even different classes of preferred, does diverge. The degree to which it does reflects proximity to liquidation, amongst other factors. A 30% discount for a late stage company between any two stages of preferred is not healthy nor common (no pun intended).

Not sure why every time a story about people selling Uber stock for less than they bought it this naïve financial interpretation comes out in droves.

also there is limited liquidity and limited secondary activity so it is either sell at $49 billion or wait for an IPO, Softbank has all the leverage, why on earth wouldn't they try to lowball investors who were going to sell and had no other options