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Uber to Sell China Business to Rival Didi After Losing Billions

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

#21

Post by dilemma »

johnloeber wrote: post #7
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 citie…

Startups are valued by potential so have Uber China's future value be capped at 1/5 of Didi is certainly a downer on its total value - this is the world's largest consumer market. The points you make about the Chinese market look completely off to me.

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

#22

Post by msvan »

Is there no antitrust law in China? Surely the optimal solution to two big corporations hemorrhaging money in competition for consumers is not that they stop competing, but rather that they cut costs. Or is such a scenario simply not possible in the dog-eat-dog tech world?

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

#23

Post by eva1984 »

johnloeber wrote: post #7
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 citie…

Apparently without Chinese numbers, it is hard for Uber to further blow up its growth story, according to itself, China has generated more rides than US daily.

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

#24

Post by erdevs »

Well played by Didi. This was a years-long chess game with enormous stakes and Didi came out winning. Make no mistake, Uber's goal was absolutely to dominate in China, if they could. That was a big part of their pitch to investors over the past two years. This deal is an admission of defeat and a retreat from competition, salvaging what value they could in the process.

I would imagine this speaks to mounting pressure on Uber to begin producing real profits. If so, expect many changes in the coming year+ as the company's unit economics (outside its usurious car leases) are clearly still abysmal in almost all markets.

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

#25

Post by flylib »

erdevs wrote: post #24

Well played by Didi. This was a years-long chess game with enormous stakes and Didi came out winning. Make no mistake, Uber's goal was absolutely to dominate in China, if they could. That was a big part of their pitch to investors over the past two years. This deal is an admission of defeat and a retreat from competition, salvaging what value they could in the process. I would imagine this speaks to mounting pressure…

this is bad news for Lyft who Didi basically just abandoned after partnering with them and were hoping that Uber would self implode by overspending in China, Uber has got the US market on lock

https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launc...

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

#26

Post by mbesto »

msvan wrote: post #22

Is there no antitrust law in China? Surely the optimal solution to two big corporations hemorrhaging money in competition for consumers is not that they stop competing, but rather that they cut costs. Or is such a scenario simply not possible in the dog-eat-dog tech world?

> antitrust law in China

Ok, seriously?

https://en.wikipedia.org/wiki/List_of_largest_Chinese_compan...

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

#27

Post by rahimnathwani »

praveenster wrote: post #10

Strange, since a couple months ago Didi, Lyft and Ola (Indian incumbent) launched a collaborative service … https://techcrunch.com/2016/04/11/lyft-and-didi-kuaidi-launc... https://techcrunch.com/2015/12/03/lyft-didi-ola-and-grabtaxi...

The Didi/Lyft collaborative service doesn't work in China. Didi customers can visit the US and order Lyft rides. But Lyft customers visiting China cannot use the Lyft app to order Didi rides.

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

#28

Post by techolic »

kenbaylor wrote: post #19
piyushpr134 wrote: post #4

Merge is such a cute word. "Uber lost China and had to sell to Didi" is more like it

Or Uber invested $2bn and walked out with $7bn. Not a bad deal. Plus the value of the combined entity will skyrocket.

Not exactly, Uber doesn't own all of the $7bn.

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

#29

Post by seanmcdirmid »

johnloeber wrote: post #7
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 citie…

Ride sharing is a huge deal here. I use it daily, my wife more so, most of the people I know use it. Car ownership is low, but that created even more opportunity here. And it's not like there was a healthy volume of taxi/black car activity before, the apps have just made it way convenient and much nicer.

This will be the biggest market for uber like services, if it isn't already. But it is also way cheaper here, so that changes the dynamics a bit.

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

#30

Post by fuzionmonkey »

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…

It's not a $7 billion "exit". It's an investment for a 20% stake in Didi for $7 billion, which presumably will increase in value as Didi continues to expand in China, especially with less need for ridiculous spending on driver incentives since they will no longer be competing with Uber.

Uber probably had something in the ballpark of 20% market share in China so it sounds like the two decided to simply make peace and become profitable together instead of duking it out for years on end and throwing away billions.

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