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Uber to Sell China Business to Rival Didi After Losing Billions

bloomberg.com

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Re: Uber to Sell China Business to Rival Didi After Losing Billions

#3

Post by sudoscript »

I can't tell if this is a good deal for Uber investors or not. As I understand it, Uber will own a 20% share in the combined company. The combined company is valued at $35 billion, so Uber's share of the value will be $7 billion (actually less, since they also need to share it with Baidu which invested directly into Uber China too). $7 billion doesn't sound too bad as an exit.

However, if Uber's China business is worth only $7 billion, and their current valuation is $68 billion, does that mean the rest of the world is worth 9x China, even though China is one of their largest and highest potential market? Suddenly the valuation of Uber's business outside China looks very inflated (even more than before). Doesn't it?

Re: Uber to Sell China Business to Rival Didi After Losing Billions

#7

Post by johnloeber »

sudoscript wrote: post #3

I can't tell if this is a good deal for Uber investors or not. As I understand it, Uber will own a 20% share in the combined company. The combined company is valued at $35 billion, so Uber's share of the value will be $7 billion (actually less, since they also need to share it with Baidu which invested directly into Uber China too). $7 billion doesn't sound too bad as an exit. However, if Uber's China business is wor…

Uber's China business was losing money before (I believe to the tune of about $1bn/year), and it looked like they weren't going to get a permanent hold in that market. Local competition was very strong.

Consequently, I would conjecture that China was never a large part of Uber's valuation. Leaving it at slightly more than 10% of their valuation seems reasonably realistic to me. Keep in mind:

* The major Chinese cities generally have very developed and efficient systems of mass public transit, reducing demand for rideshares (and cars in general)

* While China is a large country, not everyone can afford an automobile or a rideshare service. There are many reasons why scooters are so popular in SE Asia; this is one of them.

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