Why Benchmark, Google Ventures and Travis Kalanick Are Selling Major Stakes In Uber

So much for that $100 billion valuation. Time to get out while the getting's good - and before any new competitive, legal or strategic threats emerge. JL


Theodore Schleifer reports in Re/code:

Uber stock was being sold at a significant discount that valued the company at $48 billion. (The) decision to sell some of their earnings will weaken power in company decision-making, but also locks in some of their winnings ahead of an uncertain IPO in 2019. Non-sellers include Lowercase Capital and Kleiner Perkins Caufield and Byers.

Benchmark Capital will end up selling about $900 million of its Uber stock to SoftBank and other buyers, or about 14.5 percent of the venture capital firm’s holdings in the company, according to people familiar with the transaction.

Benchmark, which said last year that Uber could soon be worth more than $100 billion, tried to sell about 25 percent of its shares in the company last month at a price that was less than half that.

But because so many shareholders wanted to sell their position in Uber, Benchmark, like all other shareholders, was able to sell only 58 percent of what it sought to tender — or about 14.5 percent of its holdings, according to the people.

Uber stock was being sold at a significant discount that valued the company at $48 billion. At that pricing, Benchmark would receive about $900 million in cash in return for their 14.5 percent sale. Benchmark owned about 13 percent of the company.

Google Ventures, the venture capital arm of Alphabet, also took home some cash, sources said, as relations between Uber and Alphabet continue to fray. GV sold a similar percentage of their holdings as Benchmark did: GV, which owned 5 percent of the company, successfully sold about 14.5 percent of their stock.

That means GV cashed out about $350 million from the company.

Alphabet’s self-driving arm, Waymo, has recently sued Uber for allegedly stealing trade secrets, and Alphabet’s other investing arm, CapitalG, just this fall led a fundraising round into Lyft, leading many to believe that Alphabet would seek to divest somewhat from Uber, Lyft’s main US competitor.

GV isn’t the only investor that Uber has, at times, angered. Benchmark led Uber’s Series A financing round in 2011 and the company has made the firm a tremendous amount of money — even though relations have soured between Benchmark and the company’s first CEO, Travis Kalanick. Benchmark’s decision to sell some of their earnings will weaken its power in company decision-making, but also locks in some of their winnings ahead of an uncertain IPO in 2019.

But it also could look foolish if Uber’s growth keeps exploding and Benchmark left money on the table. The venture capital firm said in August that its analysis “shows Uber could comfortably be worth over $100B in just two years.”

Other large sellers to the SoftBank-led group, according to the people, include Kalanick’s co-founder Garrett Camp, First Round Capital and Menlo Ventures, though each saw significant reductions in the amount they could sell due to the oversubscription of the tender offer.

Menlo Ventures, which led Uber’s Series B round. will sell about 46% of their shares. First Round, which led Uber’s seed round, will part with about 38% of theirs. Those sales will generate hundreds of millions of dollars for the venture firms that bet on Uber when it was a young, risky company.

And Camp, one of Canada’s wealthiest people, will sell about 15% of his shares. That will net him around $400 million, though several Uber insiders originally expected Camp to tender even more.

Non-sellers include Lowercase Capital and Kleiner Perkins Caufield and Byers.

Kalanick himself also tucked away some of his earnings. The Uber founder sold about $1.4 billion in the tender offer, despite previously signaling that he wouldn’t sell any of his stock. Benchmark pushed for governance reforms that handicap Kalanick and keep him from returning to the CEO chair in the future — provisions that made it easier for Benchmark to reduce its influence in the boardroom.

Representatives for Benchmark, GV, Camp, Menlo and First Round declined to comment.