SoftBank Buys A Major Stake in Uber (at a Major Discount)

Technology news site The Information reported on Thursday that Japanese telecom titan SoftBank will buy at least 14% of the existing shares in ride-hailing giant Uber. The report notes that $ 6.5 billion of the SoftBank investment will be at a 30% discount against Uber’s current private valuation of $ 69 billion. The Japanese company is also investing another $ 1 billion at Uber’s current valuation.

The deal offers possible synergies thanks to SoftBank’s stakes in ride-hailing services in international markets. But the steep discount against Uber’s valuation also reflects just how rough Uber’s year has been. According to Uber shareholders quoted by The Information, one reason for the discount was Uber’s regulatory hurdles globally. (The company has been banned in several markets, among them London, primarily over driver-screening issues.) Another is the unproven status of services like UberPool. (One early Uber stockholder this month described a SoftBank offer at a very similar price as a “low blow.”)

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Uber, which is believed to be losing billions of dollars per year, is also facing a rocky path to profitability, particularly given recent stumbles in its self-driving car program. Autonomous cars are ultimately intended to cut costs, but Uber’s development team has been mired in a legal battle with Alphabet’s Waymo.

The SoftBank deal is expected to close in early 2018.