Following in the footsteps of General Motors’ Cruise division, Uber is preparing to sign a deal to sell a minority stake in its own autonomous vehicle unit ahead of next month’s IPO, said a person briefed on the matter. The upshot is that Uber for two years would be able to cover the costs of a unit that burned nearly $500 million last year, or about 23% of total cash burn.
Softbank (Uber’s top investor), Japanese auto firm Toyota and auto parts maker Denso are spending $1 billion for 14% of the unit at a post-investment valuation of $7.25 billion. The Wall Street Journal earlier reported the main elements of the deal. But here are more details:
*Toyota, which already is an investor in Uber, and Denso collectively are expected to invest two-thirds of that figure, with Softbank contributing one-third, or $333 million.
*The new board of directors of Uber’s autonomous unit will have six seats controlled by Uber and two others controlled by Toyota and Softbank (assuming Softbank gets regulatory approval).
*The unit will continue to work with vehicles made by Volvo that are augmented with special sensors. And it will work with Toyota and Denso separately on a self-driving car “kit” for Toyota vehicles.
Valuations in the self-driving car realm are a shot in the dark, since the tech is not mature. Softbank already invested in General Motors’ Cruise self-driving car division at a valuation north of $14 billion. And Waymo has been seeking outside investment too, despite being owned by cash-rich Alphabet. The Uber deal sets the stage for a potential future spinoff. In any case, this is great news for Uber’s stock.