As Softbank explores the opportunity of investing in US ride hailing giant Uber, a truce between its unit in India and rival Ola isn’t an immediate condition the Japanese investor is putting forward, according to a Bloomberg report.
Masayoshi Son, Chairman and CEO of Softbank, on August 7 confirmed that the company was in talks with both Uber as well as its rival Lyft as the US ride hailing market was very big and the most important market globally.
The report says that while Uber will raise just $1 billion to $1.5 billion at its current valuation of $70 billion, a second and much larger component will be used to purchase shares of current investors at a lower valuation.
The entire size of the round is said to be somewhere near $12 billion, with majority of that money coming from Softbank and China’s Didi Chuxing.
However, the deal is said to be hung on Uber’s ability to resolve a boardroom brawl between founder Travis Kalanick and one of the company’s largest investors Benchmark Capital. Benchmark has sued Kalanick over defrauding investors by withholding information when creating three board seats last year.
Kalanick, who was ousted as the CEO in June, has also been accused of trying to rig the process of selecting his successor due to the influence he exerts on the company’s board.
Over the past few months, Uber has gone from being Silicon Valley’s knight in shining armour to everything that’s wrong with new age technology companies, including harbouring a sexist workplace culture, having a massive disregard for following rules and allegations of knowingly allowing an employee to steal intellectual property (IP) on self-driving cars from Google.
This has caused several of the company’s shareholders to lose confidence in the company and its founder, who are now said to be looking for an exit.
If the investment in Uber does go through, Softbank will find itself being one among the largest shareholders in both of India’s top ride hailing companies. While being in such a position could give Softbank the power to force a merger between the India unit of Uber and Ola, so far no such conditions have been placed in front of Uber.
Ola, which raised close to a quarter of a billion dollars from Softbank late last year, has modified some of its regulatory terms to curtail the influence of investors. An amendment to the articles of association of the company now states that Softbank and its affiliates will require the consent of the founders Bhavish Aggarwal and Ankit Bhati and board approval to purchase shares from other investors in Ola.
The move by Ola came on the back of Softbank’s orchestration of the now failed merger of Snapdeal, in which it is the largest investor, with larger rival Flipkart. While Softbank was willing to fund Ola with up to $1 billion, the company only chose to take a smaller amount, fearing the overarching control of Softbank, and is instead in talks with firms such as Tencent and Microsoft to raise the balance amount.
Softbank’s investments in India is valued at over $6 billion, with key stakes in e-commerce firms Flipkart and Snapdeal, payments firm One97 Communications, ad-technology firm InMobi and rooms aggregator OYO Rooms.
Source: Business-Standard