Uber confirms $10 billion deal with SoftBank and a consortium of investors. With SoftBank a part of Uber, how will this affect dynamics closer home? The Japanese giant is also an investor in Bengaluru-based cab aggregator Ola.
[UPDATE] In a statement released on November 14, Softbank stated, "The Uber board and its shareholders, as well as the SoftBank Group side, have come to a basic agreement on a process for the SoftBank Group to make a future investment in Uber. However, while the SoftBank Group side is considering an investment in Uber, there is no final agreement at this stage.
"If conditions on share price and a minimum of shares are not satisfactory for the SoftBank Group side, there is a possibility the SoftBank Group may not make an investment."
The boardroom saga that Uber has been facing for close to a year now continues to see different turns. For several months now, speculation has been rife of Softbank investing in the San Francisco-based cab aggregator. Putting these speculations to rest, Uber has officially confirmed the deal to select media houses.
In a statement it released, the company said:
“We’ve entered into an agreement with a consortium led by SoftBank and Dragoneer on a potential investment. We believe this agreement is a strong vote of confidence in Uber’s long-term potential. Upon closing, it will help fuel our investments in technology and our continued expansion at home and abroad, while strengthening our corporate governance.”
With this deal, SoftBank and the latter are believed to pump in $10 billion into the company, with $1 billion being pumped directly and $9 billion by buying existing shares. Media sources state that with this deal Travis’s control in the company will reduce. The total ownership by Softbank and Dragoneer is believed to be 14 percent. However, the valuation at which these shares will be bought is unknown. Uber’s current valuation is close to $60 billion.
While Travis will be unable to retake his throne and control as CEO, he will still have significant influence over the company. As part of the board of directors, Travis has the power to appoint two extra seats; however, any further changes will need a majority approval from the board.
Masayoshi Son, CEO, Softbank, had even told the press that it might not invest in Uber but could also look at investing in it's competitor, Lyft. Several sources had also stated that for the deal to go through, Softbank had negotiated for reducing the powers of Founder and former Uber CEO Travis Kalanick.
Recode notes that with the confirmation of this deal, Benchmark, one of the key investors in Uber, will drop its lawsuit against Travis. This current deal is also labelled as an extension of Uber’s Series G round.
Since Travis stepped down as CEO and made way for Dara Khosrowshahi, there have been several sources that state, the latter has been looking at a way to be reinstated.
Uber is a mature product with a global presence. It has legions of loyalists, so the brand will sustain, for at least a while. Most investors believe that Uber will put an interim CEO in place before setting out to find a new leader.
This year has been Uber’s annus horriblus. The iconic CEO and hustler Travis has been cornered like never before.
Was it the #DeleteUber campaign? Was it Susan Fowler’s catastrophic blog post? Was it the Waymo lawsuit? Was it the ‘Hell’ or ‘Greyball’? The medical records saga? What went wrong? Which of these was the tipping point?
Krish Seshadri, who has earlier worked as a senior executive for Facebook and Zynga in the Valley and in India, believes it was a combination of cultural chaos and lack of leadership:
“Legal troubles and business problems are always a part of business. What really went wrong with Uber was the lack of a proper leadership that (should have) built a company solid with cultural values.”
However, what will be very interesting is how this will affect the Indian cab war dynamics. SoftBank, which now has a stake in Uber, also has a stake in Bengaluru-based unicorn cab aggregator Ola. In fact, Ola today is one of the hottest unicorns in India, valued at close to $4 billion, while Uber is ruling the roost globally, valued at a whopping $60 billion. And over the past few years Ola and Uber have locked horns in a war to conquer India.
Dhananjay Sharma, Associate Consultant, RedSeer Consulting, adds,
“Over the past six to seven years the Indian market has seen a sea change. With growing traffic troubles, the need for cab aggregators and bike taxis is fast growing in India. According to all our reports, the consumer demand has been consistently growing.”
Apart from the market what makes this more interesting is the fact that Uber now has a lot of mixed blood with Ola. Last year, Uber conceded a defeat of sorts in China, selling its Chinese subsidiary to Didi for a stake. And Did's funding of $5.5 billion this year was led by Silver Lake Kraftwerk, and was joined by existing investors Banks of Communications Co., China Merchants Bank Co., and SoftBank. In December 2015, Ola, GrabTaxi, Lyft, and Didi Kuaidi had formed a global alliance to take on Uber in India.
How this mixed blood pans out the scenario in India? Only time will tell.
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