Uber Investors are in a tough position--Sell or Hold Uber Shares

(Brandon Bhangoo) #1

When investors are given a choice, sell and make a profit or stay and maybe make an even bigger profit in the future, they tend to weigh their personal needs before the company needs that they are invested in. With Uber, this is increased exponentially, since Uber needs the SoftBank investment in order to survive, but investors and employees might not want to sell part of their stock for possible bigger profits when Uber goes to its IPO in 2019.

The question: Will Uber reach the IPO without SoftBank's investment?

The answer: most probably not, especially with all the legal issues coming to light and its third quarterly loss bringing 2017 to a $1.46 billion loss so far.

What will motivate some investors to sell will be the value SoftBank places on Ubers shares, and this could collide with their expectations. What remains to be decided will be, can employees and investors accept a profitable income from selling their holdings or will they bow to their expectations? Many time have companies dissolved due to greed issues, and greed is how investors perceive their expected income against a real offering. Even if SoftBank offers a relatively low evaluation, such as $48 billion instead of the much-bantered figure of $60 billion, they will still be making a phenomenal fortune estimated at around 142 times the amount they were evaluated at 6 years ago, when Uber was traded at a $300 million value.

When considering the stock held by Uber employees, which only 50% will be traded for Softbank's offer, these employees are going to enjoy an early retirement and remain with 50% of their holdings. So, the problem that faces Uber lies in the hands of a few private investors that can make or break the deal. Since SoftBank wants to own at last 14% if not 17%, they will not close the deal before this percentage of holdings has been secured.

Uber CEO, Dara Khosrowshahi is currently dealing with cleaning up Uber founder and ex CEO Travis Kalanick's mess, and the mess is growing exponentially every day with more and more incredible findings emerging with every new lawsuit. SoftBank's money comes with another advantage, its CEO, Masayoshi Son is keen on ridesharing, not for the income it tries to generate but for the obvious new market that will emerge when the autonomous cars make their official presence. He hopes to corner the global market on the future autonomous car ridesharing/taxi/limousine services that are proliferating globally.

The future is uncertain for Uber, on the one hand it could succeed in reaching the IPO with SoftBank's help, and that would turn Uber into a $500 billion empire or it could falter and flounder like other over-priced venture companies and either stay at a value of $15 billion or even go to chapter 11. How do we reach this conclusion, by looking at the numbers. Without any significant income injected into the company and the losses that will continue to amount, there is no stopping Uber from being torn apart. With SoftBank's income, Uber will succeed and then it is up to the autonomous car project to lead the way, without that Uber will remain a global TNC, have to survive competing in an ever competitive market. Also, without the money, Investors will have to wait to see what will happen with all the legal issues facing Uber over the next few years. Bottom line, sell now 50%, take the profit, and enjoy an even larger profit in the future. As the proverb says "a bird in hand is better than 2 in the bush".

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