Call it the battle of the uni-cabs.
While Uber has no problem sitting at the top of the global unicorn pyramid, with a valuation of $68 billion as of June 2016, the “cab” company had some reflexively unpleasant words to say about the private market’s attempts to value its key US competitor, Lyft, which as reported previously, has been trying to sell itself for the past several weeks.
According to a Recode report, Lyft has sought as much as $9 billion in a buyout offer but failed to secure serious interest. As a reminder, a January $1 billion investment by GM valued the startup at $5.5 billion, and after GM expressed a further interest in the possibility of buying the company outright, the startup hired investment bank Qatalyst to solicit competing offers from other potential buyers. It approached Google parent Alphabet, Amazon, Microsoft and even Apple, sources say.
The response to the Lyft sale process, however, appears to have been downright muted and Lyft eventually brought its $9 billion asking price down during conversations with potential suitors, but none of the tech companies ended up placing a bid, while GM never made a formal bid.
But the real hit came from Uber, which according to Bloomberg, told that the company wouldn’t pay more than $2 billion to purchase its main U.S. ride-hailing competitor. Bloomberg notes that Uber had previously considered purchasing Lyft as far back as 2014, and the two San Francisco companies have discussed the prospect informally.
Worse, despite executives floating the $2 billion price tag, Uber Chief Executive Officer Travis Kalanick has said privately that he would not support such a deal because he believes it would face intense regulatory scrutiny, Bloomberg adds.
To be sure, the offer is a slap in the face to Lyft, which said it would not consider $2 billion to be a credible offer. Understandably, as fierce rivals, Uber has every incentive to downplay Lyft’s value to investors and has done so in the past. Still, Uber’s suggestion that its main US-based rival is worth about a third of its most recent valuation round, and less than a quarter of what it beieves it is worth, may hurt Uber itself, which is likewise valued on similar “intangible” metrics.
Lyft’s sale process comes a month after China’s largest ridesharing company, Didi, said it will acquire Uber’s cash-burning China business.
The good news for Uber’s smaller competitor is that Lyft currently has $1.4 billion in cash, according to Bloomberg, giving the company time to continue fighting independently. The bad news is that Uber, which is said to be preparing for an IPO, is in a far stronger position, and its potential investors know this. As Recode adds, to attain a better IPO position, sources say it’s in Uber’s best interest to either drive its only U.S. competitor out of the market or at least significantly handicap it. With its recent $1 billion infusion from Didi, Uber has the resources to do so through subsidies and promotions.
A subsidy war would, however, be more expensive for Uber given its ride volume. Since Uber performs tens of millions more rides than Lyft performs per month, the company would be subsidizing more rides than Lyft does. But that’s not exactly a death sentence for Uber given that it also has more money to spend.
Furthermore,” without the resources of a larger company like General Motors, which has a vested interest in preserving Lyft’s viability given its collaboration with the company on a network of self-driving cars, it’s unlikely Lyft will be able to sustain a prolonged subsidy war with Uber”.
There is, of course, still the possibility that Lyft could be acquired by another automaker like Ford or even Tesla — both of which need a ride-hail partner to achieve some of its ambitions to create a shared network of self-driving cars.
But it’s unlikely GM would relinquish a relationship that gives them an edge at a time that automakers are scrambling to ramp up their self-driving efforts.
Finally, considering that last week Ford announced a plan to release a completely autonomous car by 2021, it may be the case that Uber’s takeunder attempt could be the best option for Lyft. As for what it means that the “efficient” market was off by more than 60% in its valuation of one of the most prominent “unicorns”, is a far more troubling issue for a world that is increasingly disconnected from fundamentals.
The post Battle Of The Unicorns: Uber Says Lyft Is Worth Only $2 Billion, One Third Of Its Latest Valuation Round appeared first on crude-oil.top.