For First Time Ever, Mutual Funds Slash Uber Valuation By Up To 15%

Tyler Durden's picture

Exactly two weeks ago, we asked if Uber - the world's most valuable private company - is heading for a valuation-crushing, 40% discount down-round.

 

Some of our arguments were the following:

  • First, those hoping for a 'return of the king' moment were disappointed after it was confirmed that Travis Kalanick isn't coming back.
  • Second, the hot money is flowing to Uber's rivals. DiDi Chuxing, China's largest ride-hailing firm, has invested in Middle East online taxi service Careem in a new partnership deal that marks Didi's latest international expansion against rival Uber
  • Third, WSJ recently reported that Uber plans to wind down its U.S. subprime car-leasing division to stem unsustainably high losses
  • Finally, according to recent press reports SoftBank was considering buying Uber shares from Benchmark with The Information noting that the transaction would value Uber at between $40 billion and $45 billion, a 33%-40% drop from the firm's latest $68 billion private round valuation.

Two weeks later, we are already half way there because as the WSJ reports, at least four mutual-funds have marked down their investments in Uber by as much as 15% -  the first ever price cuts that,  suggesting that the endless volley of scandals and bad news chasing the ridesharing company has finally caught up with it. 

Vanguard Group, Principal and Hartford Funds all marked down their shares by 15% to $41.46 a share for the quarter ended June 30, according to the fund companies’ latest disclosure documents. T. Rowe Price Group Inc. TROW 1.51% cut the estimated price of its Uber shares by about 12% to $42.70 for the same period.

Since Uber shares don’t trade publicly (yet, maybe never) mutual-fund holders must estimate the shares’ worth each quarter and mark them to estimate. According to the WSJ, seven mutual-fund companies had mostly maintained a $48.77 share price since the fourth quarter of 2015, when Uber first sold its shares to investors at that price.

Mutual-fund companies determine the valuations for closely held companies by a special committee that sits apart from the portfolio managers who buy and sell stocks. To value illiquid shares, such committees typically look to a company’s financial information, the value of publicly traded rivals, and share prices paid by investors in previous funding rounds.

Meanwhile, with Uber's dirty laundry in danger of being "discovered" following the recent lawsuit by early investor Benchmark, the company's search for a replacement to Kalanick appears to have hit a roadblock. Worse, since the latest legal feud began earlier this month subsequent to the mutual-fund filings’ June 30 ending date, and has since spiraled into a broader battle among shareholders, it is likely that even more acute writedowns will be taken in the coming days.

Meanwhile, the most troubling news for Uber is neither who sits in the corner office, nor how many lawsuits it is waging, but its persistent and unrelenting cash burn.

Amid all the controversies, Uber has sought to shore up its financials after reporting a loss of more than $3 billion last year and $708 million in the first quarter, according to people familiar with the matter. The company in July combined its money-losing Russian operations with Yandex NV’s Yandex. Taxi, the more popular ride-hailing firm there. Uber is also winding down its U.S. subprime auto-leasing business after realizing losses per vehicle were $9,000 on average, 18 times what was previously believed, according to people familiar with the matter.

To be sure, Uber has some time before it has to panic: the company had about $7 billion in cash at the end of Q1, and its revenue totaled over $3 billion in the three-month period, up 18% from the fourth quarter. Of course, by the time Uber's balance sheet becomes a matter of attention, the company's valuation will be a shadow of its $68 billion peak. That would be bad news for at least seven mutual-fund companies who own shares in Uber.

Several of them first buying in during a 2014 funding around at $15.51 a share. The price has roughly tripled since then through a series of funding rounds, but Uber hasn’t raised new capital since last year at the $48.77 price.

And now it's time for the dreaded down-rounds.

Of course, should the world's "most valuable private company" fail to go public before its first down round, it would have a huge chilling effect on the rest of the VC and IPO market. Meanwhile, even as most "Unicorns" have opted to stay private for now amid a pullback in startup funding and questions about overheated valuations, some companies backed by mutual funds have recently dared to IPO with largely adverse consequences. These include Snap, whose stock has fallen about 17% from its IPO price, and Blue Apron Inc., whose shares have cut in half since the public offering two months ago.

As for Uber, the golden child, or rather gold-plated unicorn, of the VC world, is about to get reacquainted with valuation gravity. Which, in light of its broadly deflationary impact on a broad range of industries that simply soak up VC funding in a futile war for market share, may be just what the Federal Reserve - not to mention thousands of depressed taxicab Medallion owners - ordered.

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Freddie's picture

Uber has some real shit scum investors like Rahm Emmanuel's brother and other scum.

I have used Lyft a few times and it was very good and fairly priced.  I am not sure if Lyft has slime investors like Uber.

Mr 9x19's picture

all companies based on a web interface , organizing EXISITING HARDWARE, making links with users, as a SERVICE and take it's part of the deal , in other words, all net economy 2.0 is VERMINE, LEECHES, they bring nothing and take money of existing infrastructures and people.

uber, r b&b, all this fucking shit load of internet service based communication and meet/association/link is pure void.

 

you could do the same on paper verison. internet must be considered as transparent filter, instead of beeing used as fondamental socle of an economy, the day internet is down the world is by extention.

 

after stealing others money as economy for a banksters, now they rely on others ressources to take their parts of the cake.

does uber give a fucking cent to users that need to change their cars ? i don't fucking think so.

 

 

Bes's picture

slime?

you mean like carl icahn slime in the white house?

hahaha!

#maga

-----

btw,  fuck uber

Freddie's picture

As Bannon and Ron .paul said - Trump is over.  He has gone full NeoCon/MIC.  Jared Kushner-Soros and Ivanka run the show.

Awan's and DWS will get away with their crimes and well as Clintons, Obama, Lois Lerner and the list goes on.

Session has turned into a huge diappointment.

SethPoor's picture

Traitor skank Jamie Gorelick is Kushner/Ivanka lawyer !!! Murica is doomed.

Lets Buy The Dip's picture

what they are not telling you is tat behind the scenes they are investing BIG in crypto lands, like coins like BITCOIN and ETHEREUM, which they even state will be the future. I love the zh post of this a few days ago. 

These days eveyone is into Cryptocurrencies, which are skyrockeiting.  they said that banks are buying up CRYPTO currencies, secretly. See here ==>http://www.bit.ly/2vcVJ0K

Coins like ethereum and bitcoin are skyrocketing and banks can do nothing but just sit on sidelines, they are getting involved too. :-0

Cash Is King's picture

Mark to fantasy is alive and well!

uhland62's picture

They tried to carve out a global monopoly, not by creating new jobs and opportunity but by displacing an existing industry. That's called predatory.

BlindMonkey's picture

Uber is now too big to fail.  No matter that they can't make money.  That is completely irrelevant.

 

Hang on to your hats as the gov is going to get told to bail out the private equity that is backing Uber.

 

 

NoDebt's picture

And the barriers to entry for a ride-hailing app are...... what, exactly?

More internet dot-com crap designed to hoover money out of investors pockets for the quick buck to be made by early investors (and their bank underwriters, of course).  You, as a late-stage public investor, will get NOTHING.

The last good "internet" IPO was Google.  Facebook wasn't half bad, but even that was kinda weak sauce.

Everything past that point is garbage.  

To wit:  How's those Blue Apron shares doing for you?  If there was actually an apron involved you could at least use it to wipe away your tears.  Sadly, not even that is real.

 

 

 

 

Freddie's picture

I mentioned that I like Lyft but you can also find smaller local companies on Craigslist that can take you to the airport and other places for good prices.  You usually do not get the $3 to 5 airport surcharge too. I guess Uber and Lyft have to pay the airport a vig.

 

beijing expat's picture

Bitches be like, petty and jealous. Why were they given the vote again?

Spectre's picture

Uber, who has been following Bezo's plan of attack will not make it like AMZN.  Party will be over in 36 months or less

Ben A Drill's picture

Let's see, you have company that made a app, hires independent contractors to do all the work and charges them a fee. Don't offer healthcare, paid vacations, or sick time, insurance, or a vehicle.

How is that a company?

BlindMonkey's picture

You must not know about their subprime lease arm.   The were expecting a loss of $500 a vehicle.  What they got was a loss of $9000 a vehicle.

 

How about that?

 

https://www.theverge.com/2017/8/8/16112498/uber-phase-out-xchange-car-le...

adr's picture

What the fuck is Palantir? 

Quick Google search: Data analysis for counter terrorism and for hedge funds. 

So CIA front company. 

Two platforms, Gotham and Metropolis. So Batman and Superman. 

Really? WTF, really? 

Where do we fucking live. This is worth $20.5 billion? It will never go public because then it would have to reveal funding sources. 

pitz's picture

This company doesn't even make money, and should have relatively trivial costs.  Its just an app!  Why isn't this company worth $0? 

Catahoula's picture

Chop another 35 0ff the pos

PGR88's picture

Uber sucks.  One of their "CEO's" - some prick from Harvard and Bain Consulting - recently sent their customers a blast email telling us how they dislike neo-nazis and are for a "hate free environment."

I realized these pricks are truly degraded - using the racial strife of Charlottesville for an emotive bullshit marketing campaign.  I mean, does my toaster supplier send me shit to tell me they hate neo-nazis?  Does your local supermarket?   Who the hell does that except some truly arrogant bastards?

ClickNLook's picture

Never underestimate the overestimate.

oncemore's picture

Jewish company no further comment.

whatisthat's picture

I would observe it's about time

aldol11's picture

musk is going to buy uber in a tesla stock swap :)