Company Report

Driving to an IPO: Uber Back on Track?

With a new CEO, the SoftBank investment, and the Waymo settlement, is Uber finally back on track? Clearly, these positive developments are steering the company in the right direction, but as we look ahead, three questions loom large. First, why did SoftBank invest in Uber? Second, what might SoftBank’s upside valuation scenario for Uber look like? Third, what should CEO Dara Khosrowshahi do to get ready for an Uber IPO in the next 24 months?

In the wake of the company’s recent victories, now is an opportune moment to ask these questions. It’s also an opportune moment to revisit our first deep-dive company research report on Uber, completed more than a year ago. At that time, we felt that Uber’s near-term risks and rewards were fairly balanced. In addition, we felt the company was moving in the right direction after essentially exiting its business in China via the DiDi deal. The company was taking a first clear step towards rational growth and carving a pathway towards profitability. While the past twelve months for Uber have been tumultuous to say the least, we remain cautiously optimistic about the company’s outlook.

Based on recent developments, here is our view of the road ahead.

SoftBank can bring order to Uber and the chaos of the ridesharing industry. After the most recent series G-1 financing, Uber raised more than $14 billion in primary financing. SoftBank has now invested more than $20 billion in ridesharing companies, including recent multi-billion-dollar investments in DiDi, Grab, and Ola. We estimate that SoftBank is a 10%-plus shareholder in four out of the top five global ridesharing companies. As the ridesharing industry shifts toward sustainable unit economics, SoftBank could play a key role in the industry’s upcoming consolidation and maturation.

Uber’s sum-of-parts valuation analysis reveals upside potential. We believe Uber can unlock greater shareholder value if it divests or spins off its self-driving car business as well as its operations in India and other parts of Southeast Asia. We estimate that Uber’s non-core assets are worth more than $17 billion. This number includes Uber’s ownership stake in DiDi and Yandex, its Southeast Asia operations, and its self-driving car business. Assuming $1 billion in cash burn in 2018, Uber would still have $5 billion in cash on its balance sheet at the end of this year. With Uber’s $54 billion blended valuation after the SoftBank investment, we estimate that core Uber is currently valued at $32 billion—nearly three times the company’s estimated net revenues for 2018 .

Dara’s got 99 things on his IPO-readiness checklist, but worrying about growth isn’t one. Even with major, back-to-back successes at Uber (including Uber’s Q4:17 summary results, the SoftBank investment, and the Waymo settlement), Dara’s to-do list remains long. His next step should be prioritizing internal team-building and employee morale over external corporate development initiatives or media/investor relations. Over the next six months, we expect Uber’s new CEO to build out an IPO-worthy top-management team, including a CFO and a CMO.

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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. You should complete your own independent due diligence regarding the investment, including obtaining additional company information, opinions, financial projections, and legal or other investment advice.

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Contact

For information on research and analysis

Rohit Kulkarni
Managing Director
Private Investment Research Group
(650) 300-5128Email

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Please Read These Important Legal Notices and 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. SP Investments Management is the investment manager of the SharesPost 100 Fund, a registered investment company, and other funds.

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

Information regarding companies in the SharesPost 100 List available on the website has been collected from or generated from publicly available sources. The availability of company information does not indicate that these companies have endorsed, supported, or otherwise participated with SharesPost. Company “thesis” is the opinion of SharesPost and is not a recommendation to buy, sell, or hold any security of such company.

Investors should be aware that, at any given point in time, the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest in any of the issuers discussed in the report. Accordingly, investors should not rely on the content of this report when deciding whether to buy, hold, or sell interests in the Fund. Instead, investors are encouraged to do their own independent research. Before investing in the Fund, investors are cautioned to carefully consider the investment objectives, risks, charges, and expenses before investing. For a prospectus containing more information about the Fund, please visit www.sharespost100fund.com. Read the prospectus carefully before investing.

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 (1) feedback from clients of the SharesPost Financial Corporation and other stakeholders in our ecosystem, (2) the quality of such analyst’s research, and (3) 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, a member of 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.

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Copyright © SharesPost, Inc. 2018. All rights reserved.

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