Travis Kalanick’s hopes to someday return as Uber’s CEO have just been dashed. Japanese conglomerate Softbank has struck an agreement with Uber’s shareholders to block Travis Kalanick from ever being reinstated as the leader of the perennially cash-burning ride-hailing company, according to Bloomberg.
As the Wall Street Journal reported earlier this month, Softbank is seeking to invest as much as $10 billion in Uber which would leave it with a 22% stake in the company. As part of the deal, Softbank is seeking to purchase some of these shares, which would be transferred from both the company and private investors, at a discounted valuation of $45 billion.
The agreement is Benchmark Capital’s latest victory in its long-running battle against Kalanick for control of Uber. Kalanick, an Uber co-founder who still controls three board seats, two of which are currently vacant, for control of the world’s most valuable unicorn.
As Bloomberg reports, Kalanick has privately told people he’d like to continue helping Uber “in some capacity” (presumably, by returning as CEO). Of course, Kalanick has denied intentions of returning as CEO, but has said he’d be interested in an operation position where he’d be working alongside his successor, Dara Khosrowshahi.
Venture capital firm Benchmark, which led Kalanick’s ouster in June, has sought a guarantee in writing from SoftBank that it would reject reappointing Kalanick as chief executive officer and block his appointment as chairman of the board or head of one of its subcommittees, said the people.
There have been no public proposals like this so far, but Kalanick has privately expressed interest in helping the company in some capacity, said the people, who asked not to be identified because private negotiations are ongoing.
Kalanick still retains some power over Uber through his control of three board seats, though two of those remain unfilled.
To be sure, the Softbank deal hasn’t closed yet and the investment could still fall apart. However, if it goes through, it would probably be the largest private stock sale in history. Still, as we reported last month, this would be the first major downround for Uber, as Softbank and its partners are hoping to purchase their shares at a substantial discount to Uber's valuation, a reflection of the company's currently notoriously sorry - and cash-burning - state which has it currently valued at $68 billion.
While prospective investor in the deal, Chinese ride-hailing company Didi Chuxing, has reportedly walked away, SoftBank and private equity firms General Atlantic and Dragoneer Investment Group are still in active talks with Uber. Together, the Softbank and its private-equity partners expect to invest at least $1 billion in Uber at a $69 billion valuation, while buying as much as $9 billion in shares from existing investors. As Bloomberg explains, the valuation of those shares will be determined by an auction process that’s expected to start at about $45 billion.
Under the terms of the deal currently being discussed, Softbank would end up with either two board seats, or one seat on the board accompanied by a second “observer” seat.
SoftBank has considered asking for two board seats as part of the deal, and has mulled one of its executives, Rajeev Misra, and Sprint Corp. Chief Executive Officer Marcelo Claure as candidates, the people said. (SoftBank owns most of Sprint.) Another proposal being discussed would give SoftBank one board seat and a board observer seat. Under either proposal, it’s unclear whether Uber would create new directors or shuffle its existing eleven board seats.
Meanwhile, Benchmark which recently sued Kalanick for fraud, wants terms barring Kalanick from regaining control of Uber as an essential component of any deal. It’s also asking investors to agree to unspecified governance reforms. If those conditions are met, and the deal goes through, Benchmark would sell some of its shares at the direction of Uber’s new CEO Dara Khosrowshahi.
According to Bloomberg, Softbank first expressed interest in a potential investment back in June. However, talks stalled in July after Kalanick was fired following an acrimonious struggle with Benchmark.
The board is looking to appoint an independent chairman, a proposal all directors, including Kalanick and Khosrowshahi, support. Appointing an independent director was one of the recommendations from Eric Holder, a former US attorney general who conducted an internal investigation into Uber’s culture after several former female employees alleged that Kalanick cultivated a fratty, male-dominated culture was hostile toward women.
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And in other negative news for Uber, the WSJ reported earlier that the company is shutting down its money-losing auto-leasing business after discovering earlier this year that it was losing 18 times more money than the company had previously believed. WSJ had reported last month that the company had decided to close the business.
Originally predicted to lose $500 per vehicle on average, Xchange’s managers recently informed Uber the losses were actually closer to $9,000 per car.
“We have decided to stop operating Xchange Leasing and move towards a less capital-intensive approach,” said a spokesman. The Wall Street Journal first reported on the decision to wind down the business last month.
Uber had created a separate entity called Xchange Leasing LLC to house its sub-prime auto leasing business. That entity will now be shuttered. which will affect some 500 jobs, representing roughly 3% of Uber’s 15,000-employee staff. It marks Uber’s first mass layoff in its eight-year history. However, WSJ noted some of Xchange’s employees could be moved to other divisions of the company.