Uber sells stake to Softbank

Uber shareholders have agreed to sell a significant stake in the mobility service leader to an investor group led by Softbank Group Corp. Softbank Group and other affiliated investors plan to purchase a minimum of 14 per cent of Uber at a price of around $33 a share. Consequently, this puts the value of the ride-hailing company at around US$48 billion, a significant drop from the $70 billion valuation Uber had announced a year and a half ago. “We look forward to working with the purchasers to close the overall transaction, which we expect to support our technology investments, fuel our growth and strengthen our corporate governance,” Matt Kallman, an Uber spokesman, said in a statement.

Tough times for Uber

The deal was part of a tender offer process initiated by SoftBank last month, which was a particularly bad time for the company. In November Uber disclosed that they had covered up a security breach that had comprised the personal data of around 57 million rider and driver accounts, including accounts in New Zealand. Travis Kalanick also resigned in June as Uber’s chief executive. Since his resignation there has been a struggle for control of the company. Dara Khosrowshahi, former CEO of Expedia, became Uber’s new CEO in August, and said his top priority was ending the public fights between board members and Kalanick himself. Both these incidents meant that Softbank was able to talk down the price of its investment. While Softball made the most of the situation Uber was in, they promised investors they would cover the price difference for them if the final sale price came in over $33 a share. Furthermore, in order to bolster Uber’s value, SoftBank will also purchase up to $1.25 billion worth of new shares at the existing valuation of $67.5 billion.

Who is Softbank?

SoftBank is a  Japanese technology company, which could help Uber strike deals with competitors in India or Southeast Asia. SoftBank is a major investor in Ola and Grab, Uber's rivals in those regions.

What does the deal mean for Softbank and Uber?

The deal will make SoftBank one of Uber’s largest shareholders and comes with two board seats. It will also put in motion a slate of governance reforms that were dependent on the deal going through, which will expand the board to 17 and revoke outsize voting power given to early backers.