Uber IPO: Innovation Economy set to reinvest $30 billion
May 8, 2019 | Blog

Uber IPO: Innovation Economy set to reinvest $30 billion

One way to look at Uber’s upcoming mega-IPO this week is by comparing the two largest investors in Uber with top holders of other unicorn IPOs. With an aggregate position of roughly $18 billion at the upper range of Uber’s current price target, the combined Uber holdings of SoftBank and Benchmark Capital could be worth more than the combined holdings of the largest holders of Lyft, Pinterest, and Zoom Video. In fact, Uber executives could hold nearly 2x more in equity than executives of Lyft, Pinterest and Zoom. SoftBank, the titan investor in the unicorn asset class, should benefit as the demand for ridesharing/mobility services continues to grow. In fact, a successful Uber IPO could validate the significant position SoftBank has taken in ridesharing/mobility companies around the world. No matter how you slice it, Uber’s IPO should be a big one of for VC investors, company founders and the innovation economy as a whole.

Estimated investor positions in recent tech IPOs

Unlocking value

Many investors besides SoftBank gained access to Uber during its life in the private market. While the Japanese conglomerate is the single-largest individual holder of Uber, other investors have significant stakes in the ridesharing pioneer. As of the most recent pricing range, the largest Uber investors by ownership could exit with nearly $30 billion. Note, that figure only includes investors who were required to disclose positions. Over 30 percent of the company’s value is held by other, non-disclosing participants.

Disclosed Uber Ownership

Going forward, a key question is whether these large investors will reinvest in other promising private companies once they sell their positions once the lock-up period expires. We won’t know that answer for a while, but what we do know is that the Uber IPO could replenish VCs dry powder and set the stage for another round of blockbuster companies in the innovation economy. As we have said, the IPOs so far this year equate to roughly 10 percent of the global unicorn collective valuation. In 2018, the median multiple on invested capital (MOIC) for newly minted unicorns was 5.3x. When taken together, if the $30 billion is reinvested at a similar MOIC, then the private tech market would see a significant net gain in valuation 12 months down the road, all else equal.

SoftBank sets funding pace

SoftBank has made headlines with the immense amount of capital it raised over the last few years. Despite gathering nearly $100 billion for its Vision Fund in 2017, SoftBank has already deployed over 70 percent of this capital, according to CEO Masayoshi Son. In the process, SoftBank has clearly set a new threshold in VC funding. Based on disclosed capital deployments, the Vision Fund currently is investing in some of the world’s most exciting companies at a rate of $2.7 billion per month. This pace even accelerated in 2019, with $20 billion committed during the course of Q1.

SoftBank sees a future in which ridesharing, last-mile delivery, and autonomous vehicles dominate transportation. Leading up to the Uber IPO, SoftBank participated in an additional $1.2 billion round for Uber’s Autonomous Vehicle division. Just Tuesday this week, the company joined Honda and T. Rowe in a $1.15 billion follow-on round in GM’s Cruise, valuing the unit at $19 billion. In April, the company committed $1 billion to Rappi, a South American on-demand delivery service. SoftBank also has investments in Grab, DiDi Chuxing, Ola, Doordash, Nuro, Flexport, and Getaround, – to name a few in transportation. SoftBank embodies the abundance of capital that private tech companies have increasingly benefitted from over the past few years. The company is reportedly in the process of raising a second Vision Fund.

With the upcoming exits and the potential reinvestment of IPO gains, the innovation economy and private markets seem well-positioned to continue the exciting trajectory of the past few years. Uber may be the first Vision Fund company to hit public markets on Friday. Will it be a bellwether of events to come?

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Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

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This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

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Alejandro Ortiz

Alejandro Ortiz

Alejandro is a Research Analyst, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, he was a Valuation Analyst at Duff & Phelps with a focus on TMT industries.
PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is being published by SharesPost Research LLC, and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be, directly or indirectly related to the specific views contained in this report.

Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst, including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.