What's going on?

The Japanese telecoms giant and major tech backer SoftBank has invested over $7 billion in Uber, in a deal that values Uber almost 30% below its latest fundraising round � but that�s not the whole story.

What does this mean?

SoftBank and some co-investors are buying about 18% of Uber from existing investors, including early employees and venture capital backers. The deal values Uber at $48 billion � well below the $68 billion it was valued at most recently. However, it�s normal for such �secondary� shares to trade hands at a discount to a fundraising round. SoftBank is also investing $1.25 billion in Uber directly (i.e. the money is going into Uber�s bank account, not to investors selling their shares) at the $68 billion valuation. So while SoftBank is getting a discount, comparing its investment to Uber�s previous fundraising isn�t straightforward.

Why should I care?

The bigger picture: SoftBank will be an important strategic partner for Uber.

One of Uber�s biggest challenges is expensive battles with local ride-hailing operators in countries like India. SoftBank has already invested large sums in some of Uber�s Asian competitors, which should help Uber sign money-saving cooperation agreements. While putting a necessary lid on costs, the strategy does have drawbacks � including an implicit acknowledgement that Uber may not be able to replicate its US success globally (which would, arguably, make it a less valuable company).


For markets: Uber is likely paving the way for an IPO� in 2019.

Since Uber�s new CEO took over about six months ago, he�s just about steadied a ship rocked by board infighting, management vacancies and a heavily criticized company culture. As part of SoftBank�s investment, the power of existing board members is being diluted in a move seen as likely to reduce the squabbling. Cutting costs and showing it�s on a path to profitability are probably Uber�s major goals for 2018 � paving the way for the company to �go public� in 2019 (tweet this).