Uber co-founder and former CEO Travis Kalanick plans to sell nearly a third of his stake in the ride-hailing service, a news report said Thursday.
The deal is part of a transaction with investors including Softbank Group Corp. and would bring Kalanick about $1.4 billion, Bloomberg reported, citing unidentified sources. It said Kalanick previously said he never had sold Uber shares.
Uber didn't respond to an email seeking comment.
Kalanick, who owns 10 percent of Uber, resigned as CEO last year following revelations of sexual harassment in the company, technological trickery designed to hinder regulators and a cover-up of a hacking attack that stole personal information of 57 million passengers and 600,000 drivers.
Bloomberg said Kalanick offered to sell up to half his stake but reduced that to 29 percent due to limits in the agreement between Uber and the buyers.
Uber was valued around $68.5 billion during a 2016 capital investment, but that dropped to somewhere above $48 billion in the SoftBank deal announced last week.
Despite that, early investors stand to make significant gains. Even though they sold at roughly a 30 percent discount from what the shares were worth in 2016, those who invested early made nearly 100 times their initial stake, going from around 35 cents per share to just under $33, according to one investor who requested anonymity from the Associated Press because the sales are private.
The reasons for the discount are many, among them the seemingly endless string of scandals, lawsuits and fights that plagued Uber through almost all of 2017. Also, competition has gotten tougher from Lyft and Grab in the U.S. as well as Ola in India and several emerging services elsewhere.
Rohit Kulkarni, managing director of SharesPost, a company that analyzes private company investments, says three big events that happened around the time that SoftBank began courting investors combined to discount the shares. Just before SoftBank's intent to shop for shares was announced, regulators in London refused to renew the cab-hailing app's license to operate. Then the data hack and cover-up were revealed, and the company told investors its third-quarter net loss had widened to $1.46 billion on huge legal costs.
The events helped SoftBank's group get a better deal, Kulkarni says.
Many big Uber investors include venture capital firms that got in early. They hedged their bets, selling part of their stake to bring big profits to their shareholders while holding the rest for big gains if the company gets past the scandals, the investor said.
"This is still a good deal," said Gartner analyst Michael Ramsey. "The earlier the investment, the bigger the payout."
The SoftBank group is expected to pump about $9 billion into Uber, including $1.25 billion in new shares that were purchased at the 2016 valuation. SoftBank acquired about 15 percent of Uber, while other investors in its group got around 3 percent.
The deal, expected to close this month, also brings management stability to Uber, reducing the influence of ousted CEO Kalanick over some of the company's board members and early executives and staff. SoftBank, which has global investments in other ride-hailing companies, gets two seats on the board and will help Uber navigate the tough global competition, says Kulkarni.
Uber's new CEO Dara Khosrowshahi and COO Barney Harford are experienced executives who successfully increased share value at travel booking companies, says Kulkarni, who expects Uber to be worth a total of $100 billion by the time it offers shares to the public sometime in 2019.
To get there, though, they must get a handle on regulatory disputes with governments like the one in London, and they have to show at least a trend line toward making money. "A pathway to profitability is a must," Kulkarni said.