- Christophe Morin/IP3
- Dara Khosrowshahi has a huge potential payout riding on Uber’s IPO valuation hitting $120 billion and staying there for 90 consecutive days.
- He’d also get that payout for selling the company for $120 billion.
- A source tell us his incentive is worth $100 million or more.
Dara Khosrowshahi could get a huge payday – totaling more than $100 million according to a source – if Uber’s IPO valuation hits $120 billion and stays at that level for 90 consecutive days.
The Uber CEO will also get the payout for selling the company for $120 billion, according to a disclosure the company’s its S-1 documents.
Although it had been much reported that Khosrowshahi is seeking the $120 billion valuation, Uber pretty much publicly confirmed the figure in the S-1’s footnotes about Khosrowshahi’s compensation and financial incentives, as first spotted by Axios’s Dan Primack.
The CEO will be granted 1.75 million in stock options that he can buy for $33.65 a share that vest over five years, should the company’s market capitalization reach $120 billion for 90 consecutive days, the company said. Plus the CEO will be instantly vested, 100%, for another 185,735 shares should he hit that mark, the S1 says. This is in addition to another batch of performance-based grants.
Because Uber hasn’t yet released key details about its IPO, we don’t know how much money Khosrowshahi stands to gain from buying 1.75 million shares at that $33.65 strike price, but all told, it’s a package worth at least $100 million, a source tells us.
This is backed up by our own back-of-the-envelope math based on when Softbank bought its 16% stake in Uber at about $33 a share. That share price valued the company at $48 billion. So if Uber can more than double that valuation, and the stock price doubles, those 1.75 million shares would be worth over $117 million.
Khosrowshahi currently holds 200,000 shares and was paid a $1 million salary last year, plus a $2 million cash bonus. Uber also covers a number of his expenses such as help with his tax bill ($98,357 in 2018 for that).
Then again he gave up over $180 million of stock options when he left Expedia to take the Uber job, Primack notes.
The question is: how does Khosrowshahi convince investors that Uber is worth $120 billion today? Especially when looking at the financials: $11.3 billion in revenue in 2018, a $3 billion loss on operations (although it logged $997 million in net income, mostly from $3.2 billion worth of divestitures, it said, such as selling its Southeast Asia business to Grab). On top of that, Uber has $6.9 billion in long-term debt.
Answer: It needs to show Wall Street a big, huge growth story.
This growth story rests on a couple of pillars: 1) the rideshare business, in which Uber is already the dominant player. Uber is telling investors that transportation is a $3.0 trillion market opportunity in its prospectus.
2) Its meal delivery business, Uber Eats, which Uber identifies as a $795 billion opportunity for Uber.
3) The Uber Freight business, in which Uber’s software matches carriers with shippers – a $700 billion market opportunity, Uber says.
And, last but far from least, investment in “advanced technologies, including autonomous vehicle technologies,” it says.
Uber describes a world where its fleet of robot taxis work arm-in-arm with human Uber drivers. It has not put a market value on self-driving cars. But one person tells us that Uber’s self-driving car unit could be valued internally by investors at $10 billion minimum.
For comparison, GM’s Cruise (backed by Honda) was valued at about $15 billion in 2018, according to Pitchbook while one Wall Street analysts pegged Google spinoff Waymo at roughly $75 billion in 2018.