One week after Uber lost the title of the world's most valuable startup to its Chinese competitor Didi Chuxing, when company shareholders sold roughly $10 billion in stock to Softbank at a 30% discount to its most recent valuation of $68 billion, accepting a value of $48 billion as fair, overnight the WSJ reported that Uber's former CEO and co-founder Travis Kalanick, who was ousted as chief executive in June, was selling nearly a third of his 10% stake for about $1.4 billion.
Kalanick’s sale is part of the deal that was struck by a consortium of investors led by SoftBank which is taking a 17.5% stake in Uber, mostly by purchasing shares from early investors and employees. SoftBank last week secured agreements from shareholders who were willing to sell, and the deal will close early this year, Uber said.
According to the WSJ, Kalanick had originally offered to sell as much as half of his total shares, but because there was a limit on how much SoftBank would buy, he agreed sell just 29%. Other investors also did not get to unload as many shares as they had hoped because of such widespread interest to sell. And, as Reuters summarizes:
The former CEO owns 10 percent of the company, which means his sale will unload 2.9 percent of Uber shares and earn him about $1.4 billion, the source added.
The bad news for Uber investors is that this sale by its former CEO at a sub-$50BN valuation limits any potential upside in the company for a long time, if not ever. The good news for Kalanick, is that it makes the Uber co-founder a billionaire for the first time, not just on paper.
Kalanick had never before sold shares of the company he ran for almost a decade.
The SoftBank deal offers investors and employees what could be their last chance to sell shares in a company-approved transaction before Uber’s long awaited initial public offering, planned for 2019.
Finally, the sale is also a victory for new CEO Dara Khosrowshahi, who helped broker the deal in hopes of cashing out some of the company's legacy investors and who will benefit from a deep-pocketed investor like SoftBank.