Uber shaken by investor lawsuit against Kalanick

Uber shaken by investor lawsuit against Kalanick

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.

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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.

Earlier this year Benchmark held inconclusive talks with SoftBank about selling some of its Uber shares, a move that Mr Kalanick considered to be a betrayal, according to people close to him.

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.

Source : https://www.ft.com/content/c57770fe-7e14-11e7-9108-edda0bcbc928

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