Uber Shareholder Drops Lawsuit Against Kalanick, Clearing Way For Softbank Investment

Tuesday’s meeting of the Uber Inc. board – the first following Kalanick’s unilateral decision to appoint former Xerox Corp. Chairwoman and CEO Ursula Burns and former Merrill Lynch Chairman and CEO John Thain – appears to have been a productive one.

Reuters is reporting that the board voted to move ahead with two issues, a change in governance rules, and an investment by Japan’s Softbank Group, which it was reported last month has been in talks to invest as much as $10 billion in the cash-burning ride-share giant.

To anyone who hasn’t been following the ongoing boardroom struggle between former Uber CEO Travis Kalanick, who was ousted after an investor revolt in June, and Benchmark Capital, these might seem like routine housekeeping matters.  

But in reality, they’re signs that two warring factions have agreed to put aside their differences - for now, at least - for the good of the company (not to mention their bank accounts). Benchmark has been trying to change the board"s rules to try and limit Kalanick"s power with the ultimate goal of ensuring he never returns as CEO. But today, Kalanick assented to the governance changes, albiet in a watered-down form. Meanwhile, Kalanick also gave his blessing to the Softbank deal, letting go of his reservations despite reports that Softbank had struck an agreement with Benchmark to do everything in its power to oppose Kalanick’s return as CEO as a condition of its investment, which should result in the Japanese company gaining control over at least one board seat.

Of course, by allowing both of these proposals to proceed, Kalanick is making some major concessions. What is he getting in return?

A lot, it turns out. In a separate report, Reuters said that Benchmark has agreed to drop its lawsuit alleging that Kalanick defrauded Uber’s investors. The lawsuit is related to how Kalanick managed to assert control over the two board seats to which he recently appointed Thain and Burns.

That’s a major win for Kalanick. And that"s not all. As Axios later clarified, the governance changes approved by the board will limit his power, but wouldn"t preclude the possibility of him ever returning to the helm the company.

But perhaps the most important outcome of this grand bargain is that it clears the path toward an IPO. As Axios noted, it’s the type of deal that leaves everybody feeling like a winner.

Here’s more on the governance proposal, courtesy of Axios:

What passed?

• Super-voting rights are gone, which means shareholders are all "one share, one vote." Note that only early employees actually have shares, whereas over 90% have restricted stock units (which don"t have any voting rights).


• The board will be expanded significantly, which means Kalanick would need support of a majority of independent directors to ever regain the CEO spot or be named chairman.


• If Uber doesn"t go public by two years from now, share transfer restrictions are lifted.

What didn"t pass:

• Eliminating any path to the CEO or chairman seat for Kalanick, although it"s now a much higher hurdle.

To be sure, just because Kalanick and Benchmark have put aside their differences (for now, at least) in the interest of guiding the company toward its inevitable public offering (an eventuality that holds substantial rewards for all parties involved) – doesn’t mean their plan will succeed. As we learned back in April, Uber is burning through an embarrassing amount of cash. And while an offering appears likely within the next 18 months, it could still be derailed by souring public sentiment, or the company’s disastrous finances.

In a statement addressing the meeting, Kalanick praised the board’s decisions, insisting that they were made in the best interest of the company.

travis kalanick statement pic.twitter.com/uXzLDYX0uJ

— ?_? (@MikeIsaac) October 3, 2017

And Uber"s statement, courtesy of Axios:

"Today, after welcoming its new directors Ursula Burns and John Thain, the Board voted unanimously to move forward with the proposed investment by SoftBank and with governance changes that would strengthen its independence and ensure equality among all shareholders.

SoftBank"s interest is an incredible vote of confidence in Uber"s business and long-term potential, and we look forward to finalizing the investment in the coming weeks."

* * *

One person familiar with the matter said that a group of investors led by SoftBank will be allowed to buy $1 billion to $1.25 billion of new Uber shares at a company valuation of $69 billion and 14% and 17% of the company"s stock from current investors at a discounted valuation.

Earlier media reports suggested Softbank would pay $1 billion at the $69 billion valuation, and $9 billion at a valuation closer to $50 billion.

However, while the prospects for the deal look promising, there’s still time for it to fall apart. If it does, how long before Kalanick’s relationship with Benchmark once again devolves into acrimony?

Gary Cohn's Parting Gift From Goldman: An Accelerated $124 Million

Leaving Goldman Sachs to work for the government has always been a lucrative career move: eight years ago, it allowed former Treasury Secretary Hank Paulson to sell $500 million in Goldman stock tax free, and now its the turn of Gary Cohn, Goldman"s former COO and president, who is leaving to join Trump"s cabinet, who is departing with an "accelerated" gift.

According to Bloomberg, Goldman Sachs lifted restrictions or accelerated delivery on about $123.7 million in stock and cash awards previously awarded to Gary Cohn, 56, who left last month to become President Donald Trump’s top economic adviser. Cohn was given $20 million in pay for 2016, including $18.15 million in variable compensation and a $1.85 million salary, the New York-based bank said in a regulatory filing Tuesday.

That wasn"t all: also on Monday, the bank handed over 96,572 restricted shares that were outstanding from earlier stock awards scheduled to be delivered over time. It also lifted selling restrictions on 99,909 shares that Cohn had already earned but was unable to sell. Combined, they were worth $45.9 million based on Tuesday’s closing price of $233.68 a share. About $12.8 million in additional restricted stock was included in his 2016 compensation. Cohn didn’t receive all of the restricted stock because Goldman Sachs withheld an unspecified portion of it for taxes, according to the filing.

That"s not all:

He also got $47 million to settle outstanding awards he received each year since 2011 under the bank’s long-term incentive program. He also received an $18 million cash payment in exchange for outstanding performance shares, according to the filing.

Cohn left Goldman Sachs last month after agreeing to join the Trump administration as head of the National Economic Council. He started at Goldman Sachs in 1990, becoming co-president in 2006, and then sole president. He was long seen as the heir apparent to Chief Executive Officer Lloyd Blankfein.

And since Cohn will likely vacate the post within a year or two, it means that the former COO gets to liquidate his stock holdings at a price near all time highs, without having to wait for it to vest like any other mere mortal Goldmanites. It is still unclear if he will have to pay any tax on the proceeds.

Morgan Stanley CEO James Gorman 2016 Pay: $22,500,000

With all eyes focused on Washington, on a Friday evening, Morgan Stanley just revealed that 58-year-old Morgan Stanley CEO James "don"t call me Jim" Gorman was paid $22.5 million. Despite a notable drop in earnings from expectations and a focus on cost-cutting, Gorman got a 7.1% pay rise (almost double that of Jamie Dimon).

Analysts expected Morgan Stanley to earn $3.155 in 2016. By the end of 2016 the firm realized just $2.756... but thanks to Trump"s election victory, the stock soared...

As Bloomberg notes, Gorman received $1.5 million in salary as well as restricted stock units, Mark Lake, a company spokesman, said Friday. The restricted stock is valued at about $5 million based on Wednesday’s closing price. The New York-based firm will report other components of Gorman’s pay package in coming months.

Gorman’s pay for 2015 was $21 million, down 6.7 percent from the prior year. He typically receives at least half of his compensation in the form of restricted shares. Some vest over time depending on the bank’s return on equity and stock performance relative to the S&P Financials Index, while the remainder vests over three years regardless of financial results. Part of his cash payouts also have been deferred over three years.

The CEO in November made his first sale of Morgan Stanley stock since he joined the bank in 2006. He sold shares and exercised stock options for a net gain of about $10 million, regulatory filings show.

Gorman"s pay raise comes as the firm has shifted its focus toward wealth management with a $1 billion expense-reduction program, improving the wealth unit"s profit margin and increasing shareholder capital return are key in its effort to improve return on equity.