Mutual Funds Mark Down Uber Investments by Up to 15% -- 2nd Update
August 22 2017 - 9:02PM
Dow Jones News
By Rolfe Winkler and Greg Bensinger
Four mutual-fund companies have marked down their investments in
Uber Technologies Inc. by as much as 15%, the first such price cuts
that suggest these investors are souring on the ride-hailing giant
following a scandal-ridden year.
Vanguard Group, Principal and Hartford Funds all marked down
their shares by 15% to $41.46 a share for the quarter ended June
30, according to the fund companies' latest disclosure documents.
T. Rowe Price Group Inc. cut the estimated price of its Uber shares
by about 12% to $42.70 for the same period.
Uber's shares don't trade publicly, so the mutual-fund companies
that hold them must estimate the shares' worth each quarter. Seven
mutual-fund companies had mostly maintained a $48.77 share price
since the fourth quarter of 2015, when Uber first sold its shares
to investors at that price.
Fidelity Investments held its estimate of $48.77 as of June 30.
The one outlier is BlackRock Inc., which wrote up the shares
slightly each of the past two quarters, settling at $53.88 as of
June 30.
Uber didn't have immediate comment. The mutual-fund companies
couldn't immediately be reached or didn't have immediate
comment.
Uber, which is valued at about $68 billion, has struggled to
rebound from a string of scandals, executive departures including
the ouster of its CEO, and a blockbuster lawsuit from rival
Alphabet Inc. over allegedly stolen trade secrets. The company
faces a continued fallout from a probe into its culture after
allegations of sexual harassment and sexism.
Uber's board, meanwhile, is trying to fill the CEO position
after Travis Kalanick resigned in June under investor pressure. But
the search is in flux after one of Uber's biggest investors,
Benchmark Capital, sued Mr. Kalanick in an effort to oust him from
the board. The legal feud began earlier this month subsequent to
the mutual-fund filings' June 30 ending date, and has since
spiraled into a broader battle among shareholders.
Benchmark has been negotiating for months a potential deal with
tech investor SoftBank Group Corp. to sell part of its stake at a
discount to Uber's last valuation, according to people familiar
with the matter. Benchmark and SoftBank have declined to
comment.
Amid all the controversies, Uber has sought to shore up its
financials after reporting a loss of more than $3 billion last year
and $708 million in the first quarter, according to people familiar
with the matter. The company in July combined its money-losing
Russian operations with Yandex NV's Yandex. Taxi, the more popular
ride-hailing firm there. Uber is also winding down its U.S.
subprime auto-leasing business after realizing losses per vehicle
were $9,000 on average, 18 times what was previously believed,
according to people familiar with the matter.
Uber still had about $7 billion in cash at the end of the first
quarter, these people said, and its revenue totaled over $3 billion
in the three-month period, up 18% from the fourth quarter.
Mutual-fund companies determine the valuations for closely held
companies by a special committee that sits apart from the portfolio
managers who buy and sell stocks. To value illiquid shares, such
committees typically look to a company's financial information, the
value of publicly traded rivals, and share prices paid by investors
in previous funding rounds.
The mutual-fund firms generally don't discuss individual
investments in startups, and they don't specify reasons for the
price changes in their disclosure documents. The fluctuations have
frustrated startup chief executives and venture capitalists, many
of whom assumed the firms would hold the investments at cost after
investing.
At least seven mutual-fund companies own shares in Uber, several
of them first buying in during a 2014 funding around at $15.51 a
share. The price has roughly tripled since then through a series of
funding rounds, but Uber hasn't raised new capital since last year
at the $48.77 price.
Mutual funds have historically waited until IPOs or later to
invest in young companies. But in recent years, startups began
staying private longer, opting to raise lucrative fundraising
rounds rather than bother with financial disclosures and securities
regulation. Spurred in part by rock-bottom interest rates, mutual
funds in 2013 began gobbling up stakes in companies that seemed
destined for a public offering.
Most companies have opted to stay private for now, and a
pullback in startup funding has raised questions about overheated
valuations. Some companies backed by mutual funds have recently
struggled on the public markets, including social-messaging company
Snap Inc., whose stock has fallen about 17% from its IPO price, and
meal-kit company Blue Apron Inc., whose shares have cut in half
since the public offering. Other companies have performed strongly,
including Redfin Inc., with a 68% jump in share price since their
debut.
Write to Rolfe Winkler at rolfe.winkler@wsj.com and Greg
Bensinger at greg.bensinger@wsj.com
(END) Dow Jones Newswires
August 22, 2017 20:47 ET (00:47 GMT)
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