Even Selling at a Discount, Uber Investors Make Billions

Investors in the Uber ride-hailing service didn't get all they wanted in selling at least part of their holdings to a group led by Japanese technology conglomerate SoftBank.

But don't show them too much sympathy.

Even though they sold at roughly a 30 percent discount from what the shares were worth in 2016, those who invested early made nearly 100 times their initial stake, going from around 35 cents per share to just under $33, according to one investor who requested anonymity because the sales are private.

Uber was valued around $68.5 billion during a 2016 capital investment, but it dropped to somewhere above $48 billion in the SoftBank deal announced last week. The reasons for the discount are many, among them the seemingly endless string of scandals, lawsuits and fights that plagued Uber through almost all of 2017. Also, competition has gotten tougher from Lyft and Grab in the U.S. as well as Ola in India and several emerging services elsewhere.

During the past year, Uber has been rocked by revelations of rampant sexual harassment in the company, technological trickery designed to hinder regulators, and a yearlong cover-up of a hacking attack that stole personal information of 57 million passengers and 600,000 drivers.

Rohit Kulkarni, managing director of SharesPost, a company that analyzes private company investments, says three big events that happened around the time that SoftBank began courting investors combined to discount the shares. Just before SoftBank's intent to shop for shares was announced, regulators in London refused to renew the cab-hailing app's license to operate. Then the data hack and cover-up were revealed, and the company told investors its third-quarter net loss had widened to $1.46 billion on huge legal costs.

The events helped SoftBank's group get a better deal, Kulkarni says.

Many big Uber investors include venture capital firms that got in early....

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