Uber disclosed growing losses in the third quarter, a sign of its mounting litigation costs, in documents that also signalled the formal launch of the SoftBank-led deal to invest between $7 billion (€5.9 billion) and $10 billion into the company.
The complex deal, one of the largest ever for a private tech company, has been bogged down by disagreements, but SoftBank’s new filings have now started the clock on a deal process that should wrap up by early January.
The documents, which were sent to thousands of Uber shareholders, show that the investor consortium includes SoftBank and Dragoneer, as well as new investors TPG, Sequoia and Tencent.
However, two other investors, General Atlantic and Russia's DST, dropped out of the consortium, underscoring the growing risks associated with the San Francisco-based company.
Uber’s adjusted third-quarter losses widened to $743 million, up 14 per cent from the previous quarter, on a measure that excludes interest, tax and share-based compensation, the documents revealed.
Net losses
Including those items brings Uber’s net losses to $1.5 billion for the quarter, according to generally accepted accounting principles.
As Uber faces legal challenges around the world, including a high-profile lawsuit from Waymo closer to home, its litigation efforts have become increasingly costly. The company also spends heavily on marketing and discounts for its transportation service, particularly in competitive markets such as India and the US.
Net revenues rose to $2 billion in the third quarter, up 14 per cent from the previous quarter, with gross bookings of $9.7 billion.
Shareholders must choose
With the new financial details disclosed, Uber’s shareholders must now choose whether to sell their shares at the $32.97 per share price that SoftBank offered in the tender process, or wait for a potential public offering in 2019.
In addition to buying existing shares, the consortium will also invest $1 billion in new Uber shares at a higher price of $48.77 per share. The weighted average of the two share prices equates to a $54 billion valuation for Uber in the deal, according to a spokesperson for SoftBank.
For the deal to close, the investors must buy at least 13.4 per cent of Uber shares from existing shareholders. If that threshold is not reached by the end of the year they could increase the price of their offer.
Some shareholders are already saying that SoftBank’s price is too low, and privately accuse the Japanese conglomerate of trying to “steal” the shares. “I will be very surprised if they get to 14 per cent at this price,” said one.
However, a string of bad news for Uber in recent days, including damaging reports from the Waymo-Uber lawsuit, may yet persuade shareholders to sell their shares sooner rather than wait for potential gains in an initial public offering.
The company also revealed last week that it had failed to disclose that it had been hit by a major data breach in 2016 that affected 57 million users and drivers. On Wednesday, the company said the accounts of about 2.7 million individuals were affected in the UK.
A SoftBank spokesperson said the group was confident that its price would garner interest from key shareholders.
"SoftBank and Dragoneer have received indications from Benchmark, Menlo Ventures and other early investors of their intent to sell shares in the tender offer," the company said in a statement.
Uber did not respond to a request for comment.
– Copyright The Financial Times Limited 2017
