Pre-IPO companies rarely raise convertible debt, but then Uber Technologies is not the typical pre-IPO company.
The mobile car-booking company added the capital necessary to expand internationally by raising $1.6 billion in convertible debt from Goldman Sachs Group’s wealth management clients, according to a Bloomberg story on Wednesday.
The six-year bond will convert into equity at a 20% to 30% discount to Uber’s equity valuation at the time of an initial public offering, sources told Bloomberg. If Uber has not launched an IPO within four years, the convertible bond’s coupon increases over time.
Sources also said that the San Francisco mobile car-booking company is still seeking even more capital — $600 million from hedge funds and “international strategic investors” — to add to the $1.2 billion in financing that it received in December. That funding valued the closely held technology startup at $40 billion.
Uber operates in 277 cities in 54 countries and has said it is opening in a new town every other day.
To back up its claims, the company released details of a study that included a survey of 600 drivers conducted by the Benenson Strategy Group; a research paper co-authored by Princeton economist Alan Krueger and Jonathan Hall, a Harvard-trained economist who is Uber’s head of policy research; and a blog post by Hall, according to Venture Beat.
At the end of 2014, according to the data released Thursday, Uber was using more than 160,000 drivers, adding 32,000 drivers in November and 40,000 in December, who collectively were paid $656.8 million by Uber during the last three months of 2014.
“The spectacular growth of the number of active driver-partners using Uber over the last few years is evidence that Uber provides a large number of workers a choice they prefer to other available options or not working at all,” Hall and Krueger wrote in their paper.
Drivers responding to the survey said that the number one reason that they joined Uber was for “flexibility,” as 62% of the respondents said they were using the service to supplement income from their primary jobs.
Venture Beat said that it was “no wonder” that Uber has been able to raise the convertible debt on top of the more than $3 billion in venture capital the company received in 2014, “despite a rash of bad publicity about its executive’s behavior, security, and use of customers’ data.”