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Two months ago, when Uber was struggling to resolve one of the worst scandals to ever shake a Silicon Valley giant, it seemed as if the crisis had reached its climax. It might be a rough road to redemption, but at least Uber could turn its focus to cleaning up the mess.
Instead, Uber’s tale has soured into something more like a reality TV show, in which power plays and ego battles inside the board of directors — the very entity needed to stabilize the situation — have pushed the company back to the point of crisis.
Here’s what’s happened at Uber in the past week alone. Benchmark, an early Uber investor, sought to sell its stake to Softbank at a steep discount ($40 billion to $45 billion) from Uber’s $70 billion valuation. The Information reported this story, noting that the move inflamed already high tensions on the board. Softbank CEO Masayoshi Son later said he’s “interested in discussing [an investment] with Uber,” or even with its rival Lyft.
The next day, another report said that Uber ex-CEO Travis Kalanick was seeking support from key employees to help him reassert control in a potential shareholder battle. On Monday, Google cofounder and board member Garrett Camp told employees, “Travis is not returning as CEO.” On Thursday, Ryan Graves, Uber’s first employee and a board member, left his job as a SVP but retained his board seat.
Also Thursday, Axios reported that Benchmark was suing Kalanick for fraud, breach of contract, and breach of fiduciary duty, alleging that Kalanick had abused, through “material misstatements and fraudulent concealment” of information, a 2016 board decision that let him appoint three new board members. The lawsuit is seeking to remove Kalanick from Uber’s board. On Friday, another shareholder group struck back, demanding Benchmark divest some of its assets.
And that’s just one week. Previously, Uber’s board tensions simmered at a slow boil as different parties leaked out tidbits to the press to advance their respective agendas. Now that the conflict has escalated into a legal battle, the chaos on Uber’s board is likely to drag on for a while.
This is exactly what Uber does not need right now. Both the pro-Kalanick and pro-Benchmark factions are fighting for short-term, personal victories — and the more public the fight becomes the more their egos are on the line. But these factions are risking long-term damage for everyone involved, including the controversy-weary Uber employees and shareholders who don’t have a say.
The trouble with board battles is that they often look like they can be resolved quickly but tend to drag on for years. After a board dispute led HP to fire Carly Fiorina in 2005, HP endured years of turmoil, including a boardroom spying scandal and a series of six CEOs in a seven-year period. The turmoil ended after HP named Meg Whitman CEO, but it still took a toll on the stock, which went from $52 a share in 2007 to $12 a share in 2012. Whitman, of course, recently removed herself as a candidate to replace Kalanick as CEO.
Uber’s conflict is still young, yet already it seems more intense than HP’s. For one thing, Uber has remained private, which has been a mixed blessing. On the one hand, avoiding an IPO prevented public scrutiny, which allowed Uber’s corporate culture to fester unchecked under Kalanick. On the other, it has so far shielded Uber from a collapse of its market value because its private shareholders must turn to illiquid secondary markets if they want to sell shares.
Look at what happened to Blue Apron and Snap this week after the two hit speed bumps in their respective growth plans: Both are more than 50 percent below the highs they posted shortly after they went public. And that’s just from disappointing on earnings expectations. Imagine if they were facing a bitter board battle in the wake of a series of scandals.
Based on the reports of a Softbank investment, Uber has already lost about 40 percent of its value. That could decline further if the company needs to tap financial markets for more capital before it can resolve its array of problems. Uber also faces a number of outside threats, from a growing rival in its Chinese partner Didi to lawsuits such as its dispute with Waymo.
A united board could try to tackle these problems and rebuild Uber’s wounded corporate culture. Instead, the company is still struggling over what to do about Travis Kalanick. Outside the boardroom, Uber looks like it’s being eaten by its internally generated chaos. You have to wonder what it must look like inside.
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