Uber’s Board Approves Changes to Reshape Company’s Power Balance
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Version 0 of 1. SAN FRANCISCO — Uber’s board of directors voted on Tuesday for governance changes that will reshape the balance of power at the ride-hailing service, paving the way for a stock sale to the Japanese conglomerate SoftBank and for the company to go public by 2019. The 11-member board met for less than four hours to approve some of the terms from a proposal put forward last week by Dara Khosrowshahi, Uber’s new chief executive, and Goldman Sachs, the investment bank that is an investor in the privately held company. As a result, the clout of certain Uber shareholders — including, most significantly, its former chief executive, Travis Kalanick, who is a board member — will be reduced, according to people briefed on the deliberations, who asked to remain anonymous because the conversations were confidential. Other proposed measures, including one that would have posed hurdles to Mr. Kalanick’s returning as chief executive, were dropped before the meeting. Still, the board approved enough changes for Uber to move forward on an investment from SoftBank. SoftBank has held discussions to buy a significant chunk of Uber’s stock, but the deal was contingent on changing the company’s governance structure so that some of its early investors would have an incentive to sell. In addition, directors approved a resolution for Uber to go public by 2019, the people briefed on the meeting said, setting up what could be one of the largest technology stock offerings in years. In a statement, Uber’s board said it had “voted unanimously to move forward with the proposed investment by SoftBank and with governance changes that would strengthen its independence and ensure equality among all shareholders.” The decisions mean that Uber, valued at nearly $70 billion and closely watched by other start-ups, may have defused — at least temporarily — another fractious situation. Board members have been deeply split for months on many issues, with Uber grappling with numerous scandals over its workplace culture and management. The board’s divisions have partly been rooted in a fractured relationship between Mr. Kalanick and Benchmark, a venture-capital firm that was an early investor in Uber and that holds a board seat. Benchmark helped force out Mr. Kalanick as chief executive in June. Since then, Benchmark and Mr. Kalanick have warred over how much control of Uber he retains. Mr. Kalanick had outsize voting rights at the company under a certain class of Uber stock that he owns, and he controls three board seats under an amendment to the corporate charter that was passed last year. Mr. Kalanick had spent much of the past week pushing back on some of the corporate governance proposals. To gain more leverage on the board, he appointed two additional members, Ursula Burns, a former chief executive of Xerox, and John Thain, a former chief executive of Merrill Lynch, on Friday. Both participated in Tuesday’s board meeting. Several directors, including Ms. Burns and Mr. Khosrowshahi, the chief executive, who was in London trying to regain Uber’s right to operate in that city, dialed in to the meeting, the people briefed on the conversations said. Others, including Mr. Kalanick and Mr. Thain, attended in person. Afterward, Mr. Kalanick struck a conciliatory tone. He said in a statement that the board “came together collaboratively” and that the company’s new governance framework “will serve Uber well.” Specifically, Uber’s board agreed on Tuesday to remove the special voting power carried by two categories of Uber stock, the Class B common shares and the preferred shares. Mr. Kalanick holds about a third of Uber’s Class B common stock, which originally came with 10-to-one voting power. The preferred stock, which also had special voting rights, is held by early venture investors including Benchmark. All of Uber’s shareholders will eventually have one vote per share, regardless of the class of stock that they own. SoftBank’s investment would total about $1 billion to $1.25 billion at Uber’s current valuation of $67.5 billion, the people said. SoftBank also plans to buy some stock from existing Uber shareholders at a lower valuation, they said. SoftBank would be investing in Uber along with co-investors including the investment firm Dragoneer. Still, any deal with SoftBank remains far from finished. Uber must now go through what is known as a tender offer process with SoftBank, which will bid to buy stock from existing shareholders at a discounted valuation. Whatever SoftBank offers to pay must be high enough to get shareholders to sell. And enough shareholders must agree to sell for the conglomerate to receive a 14 percent to 17 percent stake in Uber, or the deal could fall apart. SoftBank declined to comment. The resolution to take Uber public by 2019 is likely to draw scrutiny. Because Uber is widely regarded as the world’s most valuable privately held company, an initial public offering would excite Wall Street and investors worldwide. In addition, Uber’s directors voted to add six new seats to make a 17-member board, the people said. SoftBank would get two of the new seats, with another going to an independent chairman or chairwoman and three going to new independent directors. The board also approved a measure that requires two-thirds board approval for any new chief executive, until after an initial public offering. And in what may be a sign of a potential détente between Mr. Kalanick and Benchmark, the venture capital firm agreed to drop a lawsuit that it had filed against him if the SoftBank investment closes and all the governance changes go into effect, the people said. Yet even as Uber’s board was able to come to an agreement on Tuesday, some shareholders took issue with losing their outsize voting rights. Shervin Pishevar and Steve Russell, who own a combination of Class B common and preferred Uber shares, called the reduction of their voting power to one vote per share “unfair and illegal.” They added that they had “given full authority to our attorneys to pursue any and all legal actions across the globe to bring justice for those wronged by this action.” |