Toss A Coin For Uber’s New Valuation

Crunchbase News Suggests Softbank’s Investment in Uber Created Confusion About “What’s Uber Worth”

The question is wrong. It’s not “What’s Uber Worth?” because the premise that Softbank paid two different prices for the SAME share of stock is wrong. I would posit that Softbank paid a different price for two different securities. The new shares bought from the company have a liquidation priority ahead of earlier issued shares with a preference based on the $68B valuation that has been reported. The older shares bought from the existing investors have a liquidation priority after the new shares receive their preference and then have a lower preference based on the valuation at the time those shares were originally sold. Because these shares are treated differently in a liquidation event, the question is whether the ROI of the two shares bought at different prices is the same.

Using the public market valuation methodology of Price Per Share x Fully Diluted Shares = Valuation only works when each of the Fully Diluted Shares receives the same value in a sale, which is not true in a private company with multiple classes of different preferred stocks.

Bradford Harries is a partner of Chessiecap Securities, a FINRA registered broker-dealer that provides investment banking services including capital raising, M&A and other corporate finance services. He is a graduate of Stanford University with an AB in Economics and MBA. His Wall Street career began in 1979 and has particular expertise with respect to technology and emerging growth industries.