Uber Shareholder Group Wants Benchmark Off Board (axios.com)

Dan Primack, reporting for Axios: A group of Uber investors has asked that venture capital firm Benchmark step down from the company's board of directors, Axios has learned. It also wants Benchmark to divest enough shares so as to no longer have board appointment rights. The move comes one day after Benchmark sued former Uber CEO Travis Kalanick for fraud, in an attempt to have him removed from the board. From the letter: Mr. Kalanick's resignation, along with other concessions, on a few hours' notice and within weeks of a personal tragedy, under threat of public scandal. Even less so your escalation of this fratricidal course -- notwithstanding Mr. Kalanick's resignation -- through your recent lawsuit, which we fear will cost the company public goodwill, interfere with fundraising and impede the critical search for a new, world-class Chief Executive Officer. Benchmark has used false allegations from lawsuits like Waymo as a matter of fact and this and many actions has crossed the fiduciary line. Benchmark's investment of $27M is worth $8.4 billion today and you are suing the founder, the company and the employees who worked so hard to create such unprecedented value. We ask you to please consider the lives of these employees and allow them to continue to grow this company in peace and make it thrive. These actions do the opposite.

Comments

Thanks Slashdot

[Kohath]

Please keep us apprised of which investors want what management changes at all the non-public startup companies. News with this level of relevance really clears the mind in an almost zen-like way.

I'm disappointed...

[__aaclcg7560]

I was wondering what benchmark was coming off the board. Customer satisfaction? Driver satisfaction? How many days without a douchebag CEO?

Re:I'm disappointed...

[93 Escort Wagon]

I was wondering what benchmark was coming off the board.

Groupings per executive man-hour.

hard not to be cynical

[Cederic]

Someone living somewhere that UK libel laws don't apply might think that this could be paraphrased as, "Stop! You're demanding the company is run properly! We'll lose all our money if the company has to obey the law and not have a toxic working environment!"

Personally, living in the UK, I merely think that this is a cynical attempt to avoid the share price plummeting to its more natural level.

Re:hard not to be cynical

[slew]

Someone living somewhere that UK libel laws don't apply might think that this could be paraphrased as, "Stop! You're demanding the company is run properly! We'll lose all our money if the company has to obey the law and not have a toxic working environment!"

Personally, living in the UK, I merely think that this is a cynical attempt to avoid the share price plummeting to its more natural level.

There is no "share" price. Uber is not a public company. Their unicorn valuation is simply the price/share that the last sucker paid in the latest financing round (and they paid a pretty good premium for the opportunity to invest). There is no secondary market for shares that you can stamp a market value for the share price. The valuation is all in the "opportunity" to accept your investment dollars into the moneysink that is Uber.

This is simply a disagreement that is a matter of "contracts". I'm pretty sure Benchmark Capital likely put in their offer terms a requirement for a board seat (as all VC companies do in early investment rounds to presumably to "protect" the value of their investment). Just because other investors don't like this, they should have known about this going in. Unfortunately not being a public traded company means their "investment" is Uber is not a liquid investment and they knew that fact going in as well. This is why you need to be "qualified" as an investor to invest in non-public offerings in pre-ipo companies.

Minority shareholders (which describes some of the employee shareholders that are complaining) w/o board seats basically have very little protecting their "investment" in a non-public company (other than claiming investment fraud). The fact that they are complaining publicly is simply pouting. The only real hope they have is to organize a leveraged buyout of Benchmark Capital's share (for presumably ~$8B) and I don't see that is a likely path. Whoever would be financing this would likely severely dilute everyone's share (given the current risk/reward of Uber relative to the current valuation). I'm sure the complainers don't want that outcome either (since they are clearly financially motivated as well). VC's write both the checks and the rules so they own your ass when you start a company with their money. That's the price of selling out to them.

The so-called "sweat" equity mere-mortals get for working is simply the minimum the board thinks it will take to keep the people they want to keep, it has no basis in share price or the valuation (and as many insiders will tell you gets "adjusted" all the time with each funding round by dilution).

Re:hard not to be cynical

[Cederic]

There is no "share" price [...] the price/share that the last sucker paid

You managed to contradict yourself in the first paragraph.

To help you out a little: There are shares, the company has value, this means each share is worth a specific amount.

We call that the share price.

Re:hard not to be cynical

[DRJlaw]

There are shares, the company has value, this means each share is worth a specific amount.

We call that the share price.

The GP is more right than you. There are shares, the company has an unknown value, this means each share is worth an unknown amount and an unknown amount is not a price.

During the last funding round there was a share price, but lots has occurred since then and all the changes in value since that point are merely guesses. Until there is another arms-length transaction, all you have are individual shareholders that are deluding themselves to varying extents.

Re:hard not to be cynical

[Cederic]

There are shares, the company has an unknown value, this means each share is worth an unknown amount

Where the flying fuck did I say that anybody knew the share price?

an unknown amount is not a price

I don't know how much a new Bugatti costs but it still has a fucking price.

Re:hard not to be cynical

[DRJlaw]

I don't know how much a new Bugatti costs but it still has a fucking price.

Whether you know it or not is irrelevant. There is a market for new Bugattis with sellers, buyers, and comparatively frequent transactions. The transactions establish the price.

There is no market for Uber shares, selling and buying is restricted, and I'm willing to bet that you can't identify any recent transactions. Sellers don't know whaat a buyer will pay and buyers don't know what sellers will accept. It's all guesses. That is not a price.

Re:hard not to be cynical

[slew]

There are shares, the company has an unknown value, this means each share is worth an unknown amount

Where the flying fuck did I say that anybody knew the share price?

an unknown amount is not a price

I don't know how much a new Bugatti costs but it still has a fucking price.

If cannot buy the Bugatti (because of people who currently own Bugattis won't allow you to buy them because it dillutes their collector values), it doesn't have a price. Similarly, if nobody is contractually allowed to sell the Bugatti to you (or doesn't want to), it doesn't have price. This is what a illiquid investment is (compared to a product or a stock in a public market). For non-public companies, you don't get shares, you get restricted shares and you can't buy them unless the company wants you to buy them. They also aren't allowed to sell them to you unless you know what you are doing because there are landmines that are hard to predict or value.

For example, if when you got your Bugatti, you had to sign a restriction that said, before you get to sell your Bugatti, the company has the right to know who that person is and is allowed (but not required) to offer a new Bugatti to your buyer at the fraction price you negotiated, does your Bugatti actually have determined price? Or perhaps you being a savy investor in Bugattis, negotiate that the next time the company sells a Bugatti, you can (but are not forced to) buy more Bugattis at the same price you paid originally (even if the "$$/new-Bugatti" went up in the meantime). Believe it or not, all sorts of stuff like this exist in the world of restricted shares. Extra warrants that exercise on percentage ownership changes, anti-debt provisions, milestone warrants, most-favored pricing, down-round protection, etc mean that the "price-paid" is not a real reflection of the ownership of the company received. This is why there is no "price" denominated in currency for the shares.

Pay them the $8.4 billion for their shares

[BLToday]

If you think they're causing problems and you feel their shares are worth $8.4 billion then pay them the $8.4 billion. Because by your logic Uber will be worth so much more once Benchmark is gone. I'm sure Benchmark will be very happy to dump their shares for $8.4 billion.

They have to want to sell

[Anonymous Coward]

You can't force them to.

Re:Benchmark's investment of $27M

[BlueStrat]

Benchmark's investment of $27M

...Is an extremely low price for TPTB to crush an established-system-upsetting upstart like Uber. TPTB have been trying with mixed success to destroy Uber from the outside, apparently they've also decided to have a go at them from the inside.

Uber and other similar ride-sharing services threaten an entire ecosystem of local graft & corruption involving taxi services, taxi unions, and local politicians and governments. They're getting off cheap if $27M effectively destroys Uber and keeps the gravy-train of graft & corruption running.

Strat

It's about control of the Board of Directors

[Fencepost]

"The suit revolves around the June 2016 decision to expand the size of Uber's board of voting directors from eight to 11, with Kalanick having the sole right to designate those seats. Kalanick would later name himself to one of those seats following his resignation, since his prior board seat was reserved for the company's CEO. The other two seats remain unfilled." and "Benchmark alleges that Kalanick pledged in writing -- as part of his resignation agreement -- that the two empty board seats would be independent and subject to approval by the entire board (something Benchmark says was the reason it didn't sue for fraud at the time). But, according to the complaint, Kalanick has not been willing to codify those changes via an amended voting agreement."

Basically Kalanick PERSONALLY (not as Chairman, CEO or anything else) has the potential to control 3/11ths of the board, and if he can convince 3 more board members to go along then he can control the board even if the remaining 5 original board seats disagree. Benchmark regards this as way too risky considering all the other crap he's pulled in the past.

Re:Benchmark's investment of $27M

[epine]

You missed the step where TPTB—after delivering on their master plan to destroy Uber from the inside out—send out Luigi to collect their rightful graft from all the corrupt^H^H^Hgreatful taxi services, taxi unions, and local politicians and governments to recover their original investment of $27M, their opportunity cost of lighting a match to their own Uber stake (having along the way become potentially worth quite a bit on its own terms), all their time and careful, world-class plotting to destroy the apple from the inside (without making any of this so obvious as to get their asses actually sued for breach of fiduciary trust), Luigi's salary, and Luigi's nunchuck stipend (got to keep up with the Furios).

corrupt^H^H^Hgreatful^H^H^Hgrateful

[epine]

Strangely my textbox spelling checker did not flag corrupt^H^H^Hgreatful as a misspelling.

And then, like, five minutes later, my subconscious goes ding, ding, ding, I saw what you did.

Yeah, what was that?

Homo—

Oh, no! Don't finish that thought. It was probably "greatful", wasn't it. I had a bad feeling for a fleeting second there, but I was 34^H^H35 words into a 122^H^H^H123 word sentence, so I just kept barrelling along.

Deal time

[spinitch]

Benchmark can cut a sweet deal now cash out half at around $4B and lose its board seat. They can still gets some upside later if there is any or at least bank some safe profit now. SoftBank mentioned possible interest but they might want a board seat and better price since things kind of messy now , so there is merit to the damage control assertions though hard to quantify. Uber does need to get focused to preserve its astronomical valuation. Unless they come up with solid tech such as self driving patents , their software for assigning drivers not that valuable and other entrants can copy with moderate financial backing - fear Amazon and Facebook etc...