What’s Holding up the Uber IPO?

Uber, the San Francisco based ride-hailing service with annual revenue of $2.95 billion wants to float an Initial Public Offering but it can’t. The team is, however, being held back by the United States government who is yet to approve Uber’s biggest investor board members, per a CNBC report. But that is not the only hurdle the ride-sharing startup faces.

While the IPO market faces many challenges, Marcelo Claure, and Rajeev Misra, SoftBank’s representatives on Uber’s board, are waiting for the go-ahead from the authorities, a decision that is ultimately delaying the Startup’s IPO. Softbank joined Uber’s investor list with an $8 billion deal which saw a consortium of investors acquire a 15 percent stake in the ride-hailing company last year. The deal included a huge purchase of shares from existing Uber investors and employees at a $48 billion discounted valuation, which was a 30 percent drop from Uber’s most recent valuation of $68 billion.

SoftBank in Control

The mega-deal also transformed the shot-calling at the valuable startup, as the size of the board has been increased to include 17 people, with two from SoftBank. The Japanese investor said its seats would go to Marcelo Claure, the company’s operating chief and executive chairman of Sprint, and Rajeev Misra, the head of SoftBank’s Vision Fund.

A year ago, there were seven people on Uber’s board, comprising of close allies to the-then CEO Travis Kalanick. After Kalanic was ousted, the board grew, and the recent deal with SoftBank further decentralized power in the billion-dollar startup. While Kalanick holds three voting rights, six independent board members are tipping the balance on key Uber decisions. Before Kalanick was given the boot, he owned nearly a quarter of the startup alongside Benchmark. Thanks to SoftBank’s deal, the board proportion is down to one-fifth of Uber. Shareholders’ voting powers are limited, and the number of shares will directly correlate to the amount of decision-making power that will disempower Benchmark and Klanick alike.

Uber’s CEO, Dara Khosrowshahi, has noted that despite the company’s teeing for the anticipated IPO, the public debut initially slated for Q2 may not be happening in 2019 at all. It appears that a market selloff and the uncertainty hovering around recession which looms at the backseat, could have spooked the Uber team as it did with investors.

Government Shutdown

The U.S. government’s shutdown, which is now its 22nd day, is disrupting the IPO process and is causing delays in some of the more prominent deals expected this year. Uber is not the only ride-sharing services being held back, as Lyft is also experiencing a significant hurdle.

January and February typically are slow months for new offerings as companies need to complete calendar-year audits. The shutdown is starting to slow the IPO process, as pointed out by Kathleen Smith, principal at Renaissance Capital, who manages IPO exchange-traded funds. During a government shutdown, the Securities and Exchange Commission can’t give feedback and approval on filings that issuers need to move their registration statement forward in launch preparation.

Last modified: March 4, 2021 2:30 PM

Jimmy Aki: Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system.