- Singapore’s ride-hailing firm Grab announced plans Tuesday to go public at a $40 billion valuation.
- Uber is one company poised to win big, with an investment that will be worth more than $5 billion.
- This is the latest pivot Uber has made in recent years as it’s pared back cash-burning endeavors.
- See more stories on Insider’s business page.
Uber may have surrendered in many land battles around the world, but it looks like it will still end up enjoying the spoils of war.
The company is set to be one of the big winners from the upcoming public-market debut of Grab, the Southeast Asian ride-hailing and food-delivery company that announced on Tuesday it had struck a deal to go public via a special-purpose acquisition company ( SPAC). Uber is one of Grab’s largest shareholders. And with the Singaporean company’s new $40 billion valuation, Uber is sitting on a stake worth more than $5 billion.
It could be a sign of things to come for Uber, which has the chance to cash in on several of the stakes it owns in its erstwhile competitors now eyeing market debuts, including the Chinese ride-hailing giant Didi Chuxing and the Indian food-delivery service Zomato. In total, Uber’s stakes in these mobility companies could be worth about $18 billion, according to reports about those companies’ prospective valuations and Uber’s disclosures about its stakes. That’s worth more than three times the amount of Uber’s cash and short-term investments.
These investments were once part of Uber’s ambitions to capture markets around the world, alongside ventures like autonomous vehicles and trucking. But the company has steadily pared back these cash-burning endeavors, with executives choosing to focus instead on shoring up the core businesses of ride-hailing and food delivery in key markets.
Today, Uber has successfully spun itself to Wall Street as a long-term winner, despite continued losses. (It lost $6.8 billion in 2020 as the pandemic shrank its business to a fraction of its previous size.) The company’s stock was in free fall at the beginning of the pandemic but has since gained back those losses and is trading near record highs. It recently disclosed it expected at least one quarter this year to be profitable in adjusted earnings before taxes, depreciation, and other expenses.
To be sure, it’s not clear whether Uber intends to cash out its stakes in companies like Grab, Didi, and Zomato. Indeed, some analysts have said Uber holding at least some of its stakes would help its business in core markets. Holding on to these stocks would likely count as increased cash for the company to Wall Street, though Uber may not be able to define those all as short-term investments. It has a board seat in Grab, for example, and can’t easily sell off its entire stake.
But the fact that Uber may soon find itself with the ability to reap billions on the investments represents a surprising win coming out of regions that once appeared to be huge retreats.
The Grab investment, in particular, has been “a feather in the cap for Uber,” Wedbush analyst Dan Ives said. “Grab has been their bet on Southeast Asia, and they’ve dominated the space along with Gojek,” he added.
A few years ago, Uber famously went to war with local competitors around the world as it attempted to become the dominant provider of ride-hailing services in nearly every major market. Under its hard-charging former CEO Travis Kalanick, the company reportedly spent billions of dollars trying to edge out competitors like Didi in China and Grab in Southeast Asia.
Uber spent nearly $1 billion fighting Grab in Southeast Asia, according to the journalist Mike Isaac’s 2019 book about Uber, “Super Pumped.” And Kalanick said in a 2016 interview that the company was losing $1 billion a year in China at the time.
But as company executives and board members appeared to realize that these fights were proving too costly — and the likelihood of victory too uncertain — they decided to sell Uber’s local operations to its competitors and received sizable equity stakes in return. Those stakes became totems of the company’s failure to become the sole winner in every market it set its mind to.
But since Uber’s retreats, the ride-hailing market shifted from a single worldwide winner to a more balkanized landscape. And these local competitors have become substantial businesses on their own.
Grab, which also acts as a delivery and digital-wallet service, made $1.6 billion in adjusted net revenue in 2020, according to its regulatory filing. The company’s recently announced deal with a SPAC sponsored by Altimeter Capital Management values the company at $39.6 billion — a record valuation for SPACs. Uber owned about 16% of Grab as of December, according to an investor presentation. The SPAC deal will dilute Uber’s stake by a couple percentage points.
Meanwhile, Didi Chuxing recently submitted a confidential filing to go public, according to a Bloomberg report. The report said the company could be valued up to $100 billion. Uber sold a portion of its Didi shares earlier this year. After it takes some dilution in the company’s initial public offering, it will own about 12% of the company.
Uber also has a stake in Zomato in India, which it got when it sold off its food-delivery business in the region last year. Zomato is eyeing an IPO later this year with a valuation as high as $8 billion, according to The Economic Times. Uber owns just under 10% of Zomato, according to Uber’s investor presentation.
Ives said Uber was likely to sell off bits of its stakes in these companies. But he said it should retain some of its ownership to take advantage of longer-term upsides like tech partnerships.
Indeed, that appears to mirror the approach Uber took with its self-driving unit, which it sold off to a startup, Aurora Innovation, in December in exchange for a 26% stake in the combined company. While the move effectively took Uber out of the driver’s seat when it came to autonomous vehicles, it kept the company in the game, should that technology become feasible down the line.
For Uber, this strategy of selling off stakes and winding down businesses may be a far cry from the world-dominating mindset that helped build the company. But in today’s ride-hailing market, it could end up being the smarter play.
“They had to reduce scale and scope and focus on core markets. But it’s hard to argue with their strategy and how it’s all played out,” Ives said.
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