Uber is preparing to sell its Southeast Asian business to Grab in exchange for a stake in the Singaporean ridesharing company that has a big presence in that region, according to a new report from CNBC.
This wouldn’t be an unfamiliar story for Uber, which was handily beaten by Didi in China before eventually caving and selling the company to the dominant ridesharing startup in China. Uber sold its Chinese business to Didi in August 2016, which involved an equity deal. In that sense, Uber may be acknowledging where it’s getting beaten, and instead looking to pick up stakes in those companies as a hedge on its ability to expand globally. Should Didi — or Grab, in the case of this report — end up being bombshell successes, Uber would experience its own significant windfall and have some good news to report to its shareholders.
Uber CEO Dara Kosrowshahi said at the Goldman Sachs Internet and Technology conference this week that, if it wanted to be, Uber could be profitable — though it is heavily investing in emerging markets and new technology like autonomous driving. That means assessing which markets would be loss leaders as it looks for growth versus some of its better-performing markets. Uber is all over the globe, but it faces stiff competition in Southeast Asia from Grab (and, formerly, Didi in China). Kosrowshahi acknowledged that it made more sense to try to pick up stakes in the local ridesharing companies like Didi and Russia’s Yandex.
“The amount we’re investing in developing markets is a significant negative but that’s an optional investment,” Kosrowshahi said. “We think it should be on and it’s gonna be on for a while. And the big bets, autonomous [driving and other bets], increase the negative. If someone says forget about all this stuff, all I want is the core and sell all the stuff, you’d have a business for a quarter was cash flow break even. I’m pretty darn confident we can turn the knobs to even on a full basis profitable if we wanted to, but you would sacrifice growth.”
Kosrowshahi’s job since joining has been to essentially try to rid Uber of its negative baggage and figure out a way to transform it into a business that will be ready to IPO sometime in 2019. It’s made the somewhat peculiar move of reporting some of its financial performance, which has shown heavy losses, though Kosrowshahi suggests that the company would be able to dial back its investments (like international expansion) to get those financials in order as it looks at an IPO. Uber is one of the largest privately held companies in the world, with its long cap table looking forward to a significant liquidity event — something Uber will have to set itself up for if it’s going to deliver.
We reached out to both Uber and Grab for comment and additional context, and will update the story when we hear back.