The battle between Travis Kalanick and one of Uber’s largest shareholders has escalated to a new level with a lawsuit that accuses the ousted chief executive of fraud and seeks to remove him from the Uber board.
The extraordinary legal action is the latest twist in a boardroom drama that has intensified in recent months, and which some other shareholders now say risks inflicting serious damage on the ride-hailing company.
Already the board has been unable to agree on a new chief executive who will have the challenge of salvaging the company’s tarnished image.
In the lawsuit, Benchmark, one of Uber’s earliest and most prominent backers, accuses Mr Kalanick of withholding critical information from fellow directors at the same time as he successfully persuaded shareholders to give him tighter control over the board last year by allowing him to nominate three members.
The venture capital group further claims that Mr Kalanick’s hands-on involvement even after he stepped down as chief executive is threatening the company.
“Kalanick’s continuing efforts to insert himself into Uber’s board and business, even after embroiling Uber in multiple scandals and being forced to resign as CEO, have further depressed the value of Uber stock on the secondary market,” says the filing.
A spokesman for Mr Kalanick said the suit was “completely baseless” and “riddled with lies”, but stopped short of pointing out specific inaccuracies.
Are all of these signs of an outmoded and broken industry that actually needs to be disrupted?
One early Uber investor, Freada Kapor of Kapor Capital, told the Financial Times she was concerned that the lawsuit and board divisions would mean less focus on the cultural changes that the company had committed to make, including implementing the recommendations prepared by former US attorney-general Eric Holder.
“With what is going on now, I don’t think anybody is paying attention to those recommendations,” Ms Kapor said.
“As an investor, I’m apoplectic,” said another shareholder. “The people who founded the company are increasingly at loggerheads.”
Mr Kalanick was once close to Bill Gurley, the Benchmark partner who sat on Uber’s board for years, but the ties between the two men became frayed after a series of revelations about Uber’s business practices.
The court documents show that Benchmark controls about 20 per cent of voting rights in Uber and 13 per cent of the ordinary shares, a stake that would be worth around $8bn based on the company’s latest valuation, according to Financial Times calculations.
Meanwhile Mr Kalanick controls about 16 per cent of the voting rights and 10 per cent of the ordinary shares, according to court filings.
Last year Mr Kalanick was given control over three new board seats on an expanded board of 11 members, and the question of who will fill the vacant seats is one of several issues that has divided its directors and slowed the search for a new chief executive.
Matters came to a head after a group of investors, including Benchmark, demanded Mr Kalanick’s resignation in June. At the time, Mr Kalanick agreed in writing to get board approval for nominations to the three seats, but later did not keep that promise, it is alleged in Benchmark’s lawsuit.Benchmark claims that Mr Kalanick withheld key information from the board last year, including a due diligence report that would have the illuminated risks related to the acquisition of Otto, a self-driving truck company. Alphabet’s self-driving unit Waymo later sued Uber, alleging the theft of trade secrets related to the deal; Uber has denied wrongdoing in that case.Mr Kalanick also allegedly withheld information about Greyball, a software tool Uber is claimed to have used to evade regulators, which has recently become the target of legal investigations in multiple jurisdictions.“Kalanick’s overarching objective is to pack Uber’s board with loyal allies in an effort to insulate his prior conduct from scrutiny and clear the path for his eventual return as CEO,” the lawsuit claims, “all to the detriment of Uber’s stockholders, employees, driver-partners, and customers.”Mr Kalanick’s spokesman responded: “Benchmark's lawsuit is a transparent attempt to deprive Travis Kalanick of his rights as a founder and shareholder and to silence his voice regarding the management of the company he helped create.”Valued at $62.5bn in its last fundraising round last year, Uber has been at the centre of the debate over Silicon Valley’s male-dominated culture and the potential risks of having too powerful a founder.Its struggles have also become a cautionary tale of venture capital hype around a company in ways that may prove unsustainable. “It is really interesting to look at,” said Ms Kapor, referring to the Silicon Valley venture capital industry at large. “Are all of these signs of an outmoded and broken industry that actually needs to be disrupted?”
Source : https://www.ft.com/content/c57770fe-7e14-11e7-9108-edda0bcbc928