Uber faces battle over ‘destructive’ suit

COUNTERPRODUCTIVE::Three investors asked Benchmark to divest and step down from the board, saying that its lawsuit hurt valuation and interferes with fundraising


Sun, Aug 13, 2017 - Page 16

Ride-services company Uber Technologies Inc is facing a divided board of directors and angry shareholders after investor Benchmark Capital filed a lawsuit against ousted CEO Travis Kalanick, dealing another blow to the firm as it struggles to recover from a series of scandals and hire a new leader.

On Friday morning, three Uber investors asked Benchmark to divest its shares and step down from Uber’s board, according to an e-mail published by news Web site Axios and confirmed by Reuters.

Also on Friday, members of the board of directors sent an e-mail to Uber staff expressing dismay over the Benchmark lawsuit, a copy of the note obtained by Reuters showed.

“The board of directors is disappointed that a disagreement between shareholders has resulted in litigation,” the directors wrote. “The board has urged both parties to resolve the matter cooperatively and quickly, and the board is taking steps to facilitate that process.”

Benchmark, in its lawsuit filed on Thursday, is seeking to force Kalanick off the board and accuses him of concealing a range of misdeeds and scheming to retain power at the company even after he was forced to resign as chief executive in June.

Benchmark was among the Uber investors that in June pressed Kalanick to step down after a string of setbacks.

Investors Shervin Pishevar of Sherpa Capital, Ron Burkle of Yucaipa Cos and Adam Leber, an angel investor who works for music company Maverick, on Friday wrote an e-mail to shareholders and board members calling for Benchmark to remove itself from the board and divest enough of its shares so that it would no longer have the right to appoint other board seats.

“We have investors ready to acquire these shares as soon as we receive communication from Benchmark that they are willing to withdraw their lawsuit and sell a minimum of 75 percent of their holdings,” Axios reported the e-mail as saying.

The division and hostility emerging among Uber investors and directors opens a new front in a highly unusual public battle for Silicon Valley.

It is rare for a venture firm to sue the central figure of a valuable portfolio company, and equally unexpected for investors to make a countermove to push out a fellow investor backing the same company.

Pishevar, Burkle and Leber — who are not members of the board of directors — said Benchmark’s lawsuit harms Uber’s valuation, interferes with fundraising efforts and impedes the company’s search for a new CEO to replace Kalanick.

Benchmark’s tactics are “ethically dubious and, critically, value-destructive rather than value-enhancing,” Axios quoted them as saying in the e-mail.

However, one Uber investor told reporters that Kalanick’s continued role at the company has complicated the CEO search and scared off some good candidates.