Mutual Funds Mark Down Investments in Uber


 

Four mutual-fund companies recently made the decision to mark down their investments in Uber Technologies Inc. by as much as 15 percent; suggesting legitimate concern from investors after a long year of multiple scandals from the ride-hailing company.

Uber has faced numerous internal challenges this year jumping from crisis to crisis, including conflict amongst the board, which has delayed the selection of a new chief executive after Travis Kalanick was ousted in June, and a federal investigation into alleged use of technology to evade regulators in a number of cities. Benchmark, one of Uber’s largest shareholders, filed a lawsuit which has accused Kalanick of fraud; charges the former CEO has denied.

On Tuesday, the Wall Street Journal reported that three of the investors, Vanguard Group, Principal Funds and Hartford Funds, cut their Uber share price by 15 percent to $41.46, while T. Rowe Price Group cut its estimate by 12 per cent to $42.70, according to filings released on June 30 that reflect the mutual funds portfolio holdings. However, not all mutual funds decided to slash their estimate; with Fidelity holding its valuation at last year levels, and BlackRock increasing its valuation by 10 percent.

Since Uber is a private company its formal valuation technically changes only when new funds from investors are raised, but the mutual fund estimates, which are calculated by independent committees and reported at the end of every month, serve as indicators in shifts of investor sentiment. When deciding their estimates, committees typically look at the company’s financial information, the value of publicly traded rivals, and share prices paid by investors in previous funding rounds. At Uber’s last fundraiser investors paid $48.77 per share; valuing the company $62.5 billion.

The shift in valuation comes at a sensitive time for the company, which is in discussions with potential investors about a share sale. The deal looks to have investors purchase new shares at the same valuation the company had last year, while also buying shares from existing shareholders at a lower price. This kind of deal would allow Ubers most recent shareholders to avoid writing down their holdings since it would preserve the same valuation decided by the last investment round. It also meets the demand from shareholders who want to sell their current shares and are willing to accept a lower price.

Uber’s first quarter revenue this year rose to $3.4 billion, compared to $960 million during the same period a year ago

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