Uber reaches $200 million settlement with investors in IPO suit

SAN FRANCISCO(CN) — A federal judge granted Friday morning a preliminarily approval for a $200 million settlement that will resolve a class action against Uber filed by shareholders who claim that the rideshare giant misrepresented its initial public offering in 2019.

If U.S. Chief District Judge Richard Seeborg, a Barack Obama appointee, grants final approval of the settlement in December, the proposed settlement will create a $200 million fund, plus earned interest, for the class members.

According Seeborg in the preliminary approval of the settlement, the class consists of all persons and entities that purchased or otherwise acquired Uber’s publicly traded common stock pursuant and/or traceable to the offering documents for Uber’s IPO, who were damaged thereby, except for those excluded by definition or request.

Based on experts’ estimates of the number of shares of Uber’s publicly traded common stock eligible to participate in the settlement, and assuming that all investors eligible to participate do so, the class representatives estimate that the the average recovery would be approximately $0.17 per eligible share before deduction of attorneys’ fees and expenses, and approximately $0.12 per eligible share after the deduction.

Individual class members may recover more or less than the estimated amounts depending on their individual trading, however.

The class of investors claimed in their October 2019 complaint that Uber, when filing registration statements in connection with the IPO, made numerous misstatements and omissions about its financial situation.

Uber promised investors that it had a number of significant opportunities to expand its business, but the plaintiffs say those statements were misleading at the time of the offering because Uber was rapidly increasing subsidies for customer’s rides and Uber Eats meals in a bid for larger market share, causing expenses to swell.

The plaintiffs claim Uber was also planning major cost-cutting measures that undermined the company’s growth opportunities.

These uncertainties were required to be disclosed to investors but were not.

In July 2019, Uber terminated 400 workers on Uber's marketing team, representing about a third of the marketing team's global workforce of 1,200 people. This caused Uber’s marketing share to drop 13.2% in a week. Later in August, Uber announced a fiscal 2019 second quarter loss of $5.2 billion. 

“The Registration Statement and Prospectus used by defendants to effectuate Uber's offering was false and misleading in that it misled investors with regard to the company's ballooning losses, stagnating growth rate, and cost-cutting measures that undercut its key growth initiatives, all of which were known to, but concealed by, defendants at the time of the offering,” the plaintiffs said in their complaint.

Uber denied any accusations of wrongdoing and denied that any of the class members were damaged.

“We believe strongly that our IPO materials were both complete and accurate and are pleased to put this matter behind us,” an Uber spokesperson said in a statement to Courthouse News.

If the settlement falls through before final approval, the parties would resume their current litigation positions and the case would again inch towards a potential trial.

Lawyers for the class plaintiffs declined to comment before publication. Uber’s lead attorney declined to comment before publication.

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