Last week, new Uber C.E.O. Dara Khosrowshahi was thrown yet another curveball when news broke that a massive October 2016 data breach had compromised the personal data of 57 million Uber users, drivers and customers alike. Though Uber was legally obligated to report the hack, the company failed to do so, instead paying off the hackers to keep quiet and give up the data. That may explain, in part, why Japanese tech giant SoftBank is expected today to make a tender offer for Uber shares at a $48 billion valuation—a 30-percent discount from the company’s previous valuation, and one that appears to take into account Uber’s long year of turbulence.
While the $48 billion is an opening bid, the lower number serves as a reality check for a company that has targeted an initial public offering by early 2019. The past year has provided a series of nightmarish public-relations disasters that have exposed hard truths about the dangers of growing too big, too quickly. It started in February, when former Uber engineer Susan Fowler wrote a blog post detailing the harassment she experienced during her year working for the company. Uber then fired more than 20 employees as part of an internal probe into what multiple sources have described as a culture of sexism. Former attorney general Eric Holder conducted an investigation into sexual harassment and other human-resources violations at the company, concluding that C.E.O. Travis Kalanick should be given less responsibility, thus leading to Kalanick’s resignation in June. The company came under fire for its “Greyball” software, which was used to evade its rivals; its board’s messy infighting was made public; and Google parent company Alphabet’s self-driving project, Waymo, filed an intellectual-property theft lawsuit against the embattled tech giant.
Uber’s deal with SoftBank would potentially serve as an opportunity for early investors to cut ties with the embattled company, liquidating their assets and joining the ranks of Bay Area millionaires. The deal would allow many to realize stratospheric paper gains, as well as cement a series of previously agreed-upon company governance changes, including limiting Kalanick’s role, giving all share classes equal voting power on Uber’s board, and increasing the size of the board to 17 people. Kalanick’s right to appoint board seats would be subject to board approval. And the pieces seem to be falling into place: after an early squabble, Benchmark, which was partially responsible for Kalanick’s ouster earlier this year, agreed to suspend its lawsuit against Kalanick, with plans to drop it once the SoftBank investment is complete.
SoftBank’s initial offering, upon which those governance changes are contingent, is just a starting point. Depending on the number of investors the firm can convince to sell, the price per share is expected to increase, and its offer to invest $1 billion in Uber at its current $69 billion valuation still stands. But SoftBank C.E.O. Masayoshi Son has shown he’s not afraid to play hardball. He has already threatened to walk away from the deal entirely, and as Axios’s Dan Primack notes, his $48 billion offer is deliberately low so as to make an eventual increase appear more generous. Meanwhile, as both Democrats and Republicans in Congress push for answers from Uber about its data breach and subsequent cover-up, a fresh round of bad news could see investors even more eager to offload their shares.
