Once upon a time, stock markets existed to raise capital for new and expanding companies through share issuance. Those days are long gone. Now the flow of shares is reversed. Instead of new stock going to the public and money flowing into companies, stock flows into companies, in the aggregate, as cash goes out to investors (who may or may not be the companies' own employees).
Who better to write the next chapter in the evolution of public markets than everyone's favorite on-demand black-car-service-cum-taxi-operator-cum-mass-transit-company-cum-logistics-firm-cum-driverless-vehicle-fleet-cum-flying-car-service: Uber. Instead of going through all the hassle of courting investment banks, arranging an IPO, selling shares and then slowly buying em all back, Uber has decided to just commence with the buybacks now, even if the company's stock currently exists as a sort of vaporous promise of future ownership rather than a true public issue. From Bloomberg:
There’s a little-known option available to Uber loyalists looking to cash out. Those who work at the San Francisco company for at least four years can sell as much as 10 percent of their shares, people familiar with the matter said. The program has a built-in incentive to entice staff to stick around. The seller gets paid out over many months and must remain at Uber during that time, said the people, who asked not to be identified because they weren’t authorized to discuss the program publicly.
This is an elegant solution to the whole never-going-public thing! Uber employees (apparently only about 200 of them qualify) don't have to get too antsy while waiting for their hard-earned shares to become fungible, and Uber can then turn around and sell those dang shares back to Saudi Arabia or whoever. Actually, Uber's been doing this for a while, and beyond placating employees, there's a perfectly self-interested reasoning behind it:
While Uber’s buyback approach can help it retain talent, it may also benefit the company’s bottom line. Using its own money, Uber purchases common stock for 25 percent to 35 percent less than the price of preferred shares from its most recent funding round, one person familiar with the matter said. It can then turn around and sell shares at a premium in a subsequent round. Still, an employee who got their stock four years ago stands to make more than a 10-fold increase on the sale.
The whole process starts to seem a little bit circular:
- Issue private shares to investors.
- Issue private shares to employees.
- Buy back private shares from employees.
- Sell private shares to other investors.
Did the investors in round 1 know that some of their cash would be used to buy back shares issued to employees? Who knows. It probably doesn't matter. The upshot is that one of Uber's chief motivations for going public – calming the nerves of impatient employees – looks a little less pressing.
In other words, go ahead mark Uber IPO in your Google Calendar for 2027.