Buzz, secondaries, TC, Transportation, Venture Capital

As Uber’s value slips on the secondary market, Lyft’s is rising

It’s been happening for months. The value of Uber’s shares has been falling on the secondary market, the company’s shares hammered down by an barrage of press attention paid to its real and perceived misdeeds.

That slip is widely seen as the reason Uber investors strong-armed CEO Travis Kalanick out of his role as CEO on Tuesday night. As numerous sources confirmed to us yesterday (and The Information first reported in late April), Uber is right now valued at roughly $50 billion by secondary shareholders — a far cry from the $68 billion that its primary investors have assigned it.

It’s especially notable as last year, secondary investors were willing to pay full freight — even a premium — for any Uber shares they could lasso.

Meanwhile, Lyft’s stock is on the rise. Our sources say in fact that typical 20 percent discount assigned to shares on the secondary market has, in Lyft’s case, dropped to a 9 percent discount in some case as buy-side interest grows and existing shareholders hang on for the ride.

“We’ve definitely seen pricing in Lyft go up,” says one source who asked not to be named in an article about related trades.

“Part of that is the clouds around Uber have made Lyft relatively more attractive. But that rise is also a function of Lyft’s recent round” of fundraising, says this person, noting that in April, Lyft closed on $600 million in fresh funding, at a $7.5 billion valuation.

It’s hard to know if these trend lines will continue, obviously. Much depends on how quickly Uber is able to fill out its executive ranks and with whom. But sharks are circling, with prospective buyers aware that Uber shares could rise if the company snags a big-ticket name like YouTube CEO Susan Wojcicki and trying to seize on fear in the meantime.

One source says she saw a bid indication — meaning an expression of interest — in purchasing Uber shares at a $40 billion valuation yesterday. That was a first, says this person. And no deal was transacted at that price.

In fact, unlike with Lyft — which has historically been willing to approve employee transfers of secondary shares and only more recently instituted more restrictions — any data points regarding downward pressure on Uber should be “taken with a grain of salt,” says Shriram Bhashyam, the co-founder and general counsel at EquityZen, a marketplace of pre-IPO shares. Because Uber has famously tight transfer restrictions and policies around secondary trading, any conclusions are “based on thin volume, ” he says.

Not all trades in Uber are share transfers, he further notes. Because of the transfer restrictions, some Uber trades are transfers of interests in special purpose vehicles — pop-up funds, essentially — that hold shares. And that’s a discount factor separate and apart from the governance and culture issues plaguing the company.

Still, our sources are betting Uber’s valuation will drop further still before it rebounds, particularly given that, absent a miracle, a down round seems all but inevitable.

“[The secondary market] is not like a public market where you see trades go on and off,” says Santosh Rao, head of research at Manhattan Ventures Partners. “It’s an opaque market, and it’s too early to tell [where Uber goes from here.]

“But I think people will be cautious. I think people who wanted to buy are holding off.”

All things considered, he suggests, they can’t help but ask themselves: how much is Uber worth now?

Featured Image: REUTERS/Lucy Nicholson/Files

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