Uber shares could soar if partial sale of $6.3bn Didi stake happens

• Uber considers selling part of its $6.3bn stake in Chinese rival ride-hailer Didi Chuxing
• The US-based ride hailing company looks to raise cash to bolster balance sheet
• Uber facing signifcant pressure on earnings

Uber Technologies is looking to sell part of its $6.3 billion stake in China’s Didi Chuxing, with the former looking to raise cash to bolster its balance sheet by offloading its minority holdings in other companies, according to a report by Bloomberg.

The news is likely to help lift Uber’s share price, with the stock down 3% this week, though the stock has doubled in value over the last six months.

However, it is worth noting that despite the stock up 150% since hitting its March low of $14.82, the company is still trading well below its IPO price of $45 per share back in May 2019.

Uber is trading at $36.77 per share at the time of publication, with the stock up 18% year-to-date.

Uber pulls out of global ambitions to handle problems at home

Rumours that Uber is looking to offload its interest in Didi Chuxing is the latest in a string of divestments the company has made, with the business clearly looking to consolidate operations and walk away from it global ambitions amid challenging market conditions.

Earlier this month, the ride-hailing company agreed to sell its European freight business and some of its shares in Yandex, a Russian search engine provider. It is also in the process of selling a portion of its shareholdings in Southeast Asian rival Grab.

By selling its stakes in various businesses, Uber will have cash that will offset its large capital expenditure and help it navigate the challenging new normal created by the coronavirus pandemic.

‘Uber’s reported plan to sell a minority stake in Didi, and its proposal for a similar approach to Yandex, may help offset cash burn that’s compounded by a shift in bookings mix toward food delivery,’ Mandeep Singh, technology analyst for Bloomberg Intelligence, said.

‘But near-term EBITDA pressure may not subside given a reliance on its Mobility segment, where our calculations suggest EBITDA could decline 60-70% in 2020,’ he added.

For the partial divestment in Didi to go ahead, Uber will require the approval of Japanese conglomerate SoftBank, as it controls significant stakes in both companies.

Uber sees quarterly revenues decline amid Covid-19

The company released its second quarter (Q2) results at the beginning of August, shedding light on the impact of Covid-19, with revenues down 29% year-over-year to $2.2 billion and its mobility segment (ride-hailing unit) generating $50 million in adjusted EBITDA profit, despite a 73% year-over-year decline in gross bookings.

‘Our team continues to move at Uber speed to respond to the pandemic’s impact on our communities and on our business, leading our industry forward with new products and safety technologies, and harnessing the strong tailwinds driving exceptional growth in delivery, with gross bookings growing 122 percent year-over-year excluding exited markets,’ Uber CEO Dara Khosrowshahi said.

‘We are fortunate to have both a global footprint and such a natural hedge across our two core segments: as some people stay closer to home, more people are ordering from Uber Eats than ever before,’ he added.

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