It’s been happening for months. The value of Uber’s shares has been falling on the secondary market, hammered by a barrage of press attention paid to its real and perceived misdeeds.
That slip is widely seen as the reason Uber investors strong-armed CEO Travis Kalanick out of his role as CEO on Tuesday night. As numerous sources confirmed to us yesterday (and The Information first reported in late April), Uber is right now valued at roughly $50 billion by secondary shareholders — a far cry from the $68 billion that its primary investors have assigned it. Such a fall is especially notable given that last year, secondary investors were willing to pay full freight — even a premium — for any Uber shares they could lasso.
Meanwhile, Lyft’s stock is on the rise. Specifically, say our sources, the typical 20 percent discount assigned to shares by secondary purchasers has, in Lyft’s case, dropped to between 13 and 9 percent, as buy-side interest grows and existing shareholders hang on for the ride. “We’ve definitely seen pricing in Lyft go up,” says one source who asked not to be named in an article about related trades.
“Part of that is the clouds around Uber have made Lyft relatively more attractive,” says this person. But that rise is also a function of Lyft’s recent round of fundraising, he says, noting that in April, Lyft closed on $600 million in fresh funding, at a $7.5 billion valuation.
It’s hard to know if these trend lines will continue, obviously. Much depends on how quickly Uber is able to fill out its executive ranks and with whom.
But sharks are circling, with prospective buyers trying to gauge fear in the market — and how much it might buy them.
One source says she saw a bid indication — meaning an expression of interest — in purchasing Uber shares at a $40 billion valuation yesterday.
That was a first, says this source, and no deal was transacted at that price, as far as she knows. In fact, unlike with Lyft — which historically has been willing to approve employee transfers of secondary shares and only recently instituted more restrictions on those transactions — any data points regarding Uber should be “taken with a grain of salt,” observes Shriram Bhashyam, the co-founder and general counsel at EquityZen, a marketplace of pre-IPO shares.
First and foremost, because Uber has famously tight transfer restrictions and policies around secondary trading, any conclusions are “based on thin volume,” he says.
Not all trades in Uber are share transfers, he further notes. Because of those transfer restrictions, some Uber trades are transfers of interests in special purpose vehicles — pop-up funds, essentially — that hold shares, and those include a discount factor separate and apart from the governance and culture issues plaguing the company.
Either way, it seems logical that Uber’s valuation will drop further still before it rebounds, and not just on the secondary market. All things considered, a down round seems all but inevitable right now.
“[The secondary market] is not like a public market where you see trades go on and off,” says Santosh Rao, head of research at the investment bank Manhattan Ventures Partners. “It’s an opaque market, and it’s too early to tell [where Uber goes from here.] Still, he says, “I think people will be cautious. I think people who wanted to buy are holding off.”
Given recent weeks in particular, they can’t help but ask themselves: How much is Uber worth now?