inferior technology? Instead, it could shell out around $70 million to buy Navya outright. The answer, of course, is that the artificially
But like WeWork, Uber is massively unprofitable ... While its losses are narrowing, Uber still burns through nearly $2 billion per year. Both Uber and WeWork are about 10 years old... and neither is close to profitable today. So how does a company like Uber lose $2 billion a year and still end up trading in the private markets at nearly $70 billion – only slightly behind benchmark S&P 500 Index stalwarts like investment giant Goldman Sachs, package carrier UPS, and drugmaker Bristol-Myers Squibb? The answer is Masayoshi Son. You see, Masa has also been working his valuation fallacy magic with Uber... In January 2018, Masa invested $7.7 billion of the SoftBank Vision Fund into Uber at a valuation of $48 billion. And just last month, the SoftBank Vision Fund weighed helping bolster Uber’s cash-draining self-driving unit by investing nearly $1 billion in cash at a valuation between $5 billion and $10 billion. News service Bloomberg recently pointed out that Uber’s self-driving technology is rated as one of the worst around, according to market- research firm Navigant Research. It’s worse than the technology from French firm Navya, a company that sports a valuation of less than $70 million . So if Masa’s SoftBank Vision Fund wants a piece of the self-driving phenomenon, why would it spend nearly $1 billion on Uber’s
high valuation of Uber's self-driving technology will inflated Uber's overall
valuation, pushing it toward a $80-$90 billion target price for its IPO. (Uber ended up falling slightly short of that target, despite Masa’s best intentions.) And that's more than twice the $45 billion valuation of Masa's initial investment. As Bloomberg noted... If [Masa’s Softbank Vision Fund] fronts three-quarters of the planned $1 billion, it’ll be paying $750 million but helping more than double the value of its total Uber investment [of about $9 billion]. Uber is massively unprofitable ... While its losses are narrowing, Uber still burns through nearly $2 billion per year. Those three letters – “IPO” – are what take this story from funny to terrifying... While Masa didn’t directly invest in Lyft, it has been widely reported that his generous funding of Uber led indirectly to Lyft’s rich valuation. You see, Masa’s rival – another Japanese billionaire named Hiroshi Mikitani, who founded e-commerce and Internet conglomerate Rakuten – helped to fund Lyft. Last week, Uber went public at a valuation of $70 billion. WeWork's IPO won't be far behind. Even worse, Wall Street investment bankers are pushing for the SoftBank- pegged valuations . The Lyft and Uber IPOs
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May 2019
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