Uber’s announcement of its IPO pricing earlier today came with a $500 million belated Easter egg. The payments giant PayPal is making a half-billion-dollar investment in the company, paying $47 per share, which gives the company a valuation of $78.8 billion (in the middle of the range of Uber’s IPO pricing of $44-$50 per share). Neither Uber nor PayPal gave much detail about the $500 investment. Uber’s S-1 and a short statement on LinkedIn from PayPal’s CEO Dan Schulman both used the same wording, noting the deal would help the two work on “future commercial payment collaborations, including the development of Uber’s digital wallet.” So what’s actually going on here? The deal clearly gives Uber another significant piece of financial padding going into its public listing — and it needs it, with a loss of $1 billion in the last quarter alone — as well as a closer commitment from one of its existing payments partners. But it’s also a significant move for PayPal as the company works on building the next stage of its financial services empire. The company — untethered from eBay after first spinning out from the marketplace company in 2014 and eventually losing its status as its primary payments provider last year — has been building out a profitable business on its own steam, reporting 227 million accounts earlier this week with revenues up more than 30 percent to $4.13 billion for the quarter. At the same time, it’s also been slowly laying the groundwork for how it can leverage deals with other companies to boost that growth even more. There have been a number of smaller strategic investments in a range of startups, including European startups like savings company Raisin and cross-border payment startup PPRO, as well as Asian startups Pine Labs and Viva Republica. However, PayPal took a much bigger bet this year that, like the Uber investment announced today, underscores how it is also evaluating and buying into larger marketplaces, too. In March, it made its biggest investment to date as an independent company, putting $750 million into Argentina’s MercadoLibre, an e-commerce powerhouse that acts as a kind of eBay of Latin America, with auctions and a marketplace for buyers and sellers to connect, and a payments system called MercadoPago. Uber-size me The eBay similarity probably made MercadoLibre a natural partner for PayPal. But more likely, I think the investment is part of a super-sized next step modeled on that eBay relationship — a way for PayPal to build its network beyond what it can build on its own steam, by catching a ride on other high-growth companies to pick up some of their network effects. This is, in fact, something that Schulman talked about just days ago in PayPal’s earnings call: We see international as a tremendous opportunity space for us. And if I take a step back, we’re willing to invest in companies or acquire companies that we believe advance our strategic agenda. We do want to be the leading global digital payments platform, and that means looking across the world at who are the leading players there and how might we partner together in some way to take our respective platforms, the respective number of customers we each have. MercadoLibre, between their marketplace and MercadoPago, their payments infrastructure, they have 200 million-plus customers themselves. And so you put that together with ours, you have almost 500 million customers… there are companies like MercadoLibre where a strategic partnership may make sense for us, and they allow us to expand our presence into a geography or a set a capabilities. And by the way, there may be other companies around the world that offer similar strategic options for us and we’d be willing to explore partnerships, very akin to what we did with MercadoLibre. The fact is, though, there aren’t really any more big e-commerce marketplaces left to partner with. Amazon is PayPal’s arch nemesis, Alibaba has Alipay and the eBay ship has sailed. (Walmart, incidentally, is also a PayPal partner, and I’ll be interested to see what develops there, including with Walmart’s own big e-commerce marketplace purchase, Flipkart.) In the meantime, we’re seeing a new opportunity emerge with high-growth companies that are building strong commercial relationships with their customers, in the form of these large transportation-on-demand providers, like Uber. There are three areas where PayPal is hoping that its Uber investment will play out (and hopefully pay out). The first of these will be increasing transactions. Today, PayPal is Uber’s leading payment provider in the U.S. and Australia, and with this investment, from what I understand, it will be looking to ramp up and take on that role in more countries in the months ahead. That will pose an interesting competitive threat to the other payment companies that work with Uber, such as Adyen, which itself had a very successful public markets debut earlier this year and lists Uber as one of its biggest customers. The second will be helping to build and run Uber’s own efforts in providing payments and managing transactions. Right now, the main manifestation of that is Uber Cash, the digital wallet that Uber launched in September that lets users top up Uber accounts with money that they can use on Uber services, sweetening the deal to lure more users to this by offering discounts. A big reason Uber is building Uber Cash is because once it can control the flow of the money itself, it doesn’t have to pay transaction costs on those purchases, and along with another product it introduced in 2017, the Uber Visa Card, it becomes a gatekeeper of its customers’ spending. This might sound familiar: It is similar to the model PayPal built with in its own service. It’s not clear how the two will work together on this, whether it will be simply an integration so that PayPal will become one more way to top up your Uber Cash, or whether PayPal will help power the whole service. The latter leads to the third way that PayPal and Uber might be working together down the line.<doc-sep>PayPal is on a spending spree. Its latest mega-investment in Uber this week hints at a larger strategy to compete abroad. The payments giant is investing $500 million Uber ahead of the highly anticipated IPO, according to Uber's updated S1 filing. In March, PayPal invested $750 million in Argentina's e-commerce giant MercadoLibre. "I don't think you spend that kind of money unless it's part of a global strategy to enable these new super-platforms," said Ryan Gilbert, a partner at venture capital firm Propel Ventures. "PayPal needs to step on the growth gas pedal and these investments will buy the company access to millions of global customers." Uber operates in more than 60 countries, and 400 cities. PayPal has a global footprint, too. It's available in more than 200 countries and regions and supports 25 currencies. By handling payments on the back-end for Uber, the company is positioning itself to benefit from some of some of Uber's potential growth. "While baseline payments products have revolved rapidly over the recent fintech investment cycle, customer acquisition strategies have not," Gilbert said. "I expect we will see similar investments in future." The deal builds on an existing partnership. PayPal is already Uber's lead payment processing partner in the U.S. and Australia, and has worked with the ride-hailing company since 2013. In a LinkedIn post, PayPal CEO Dan Schulman called it a "another significant milestone" in the company's journey to be a "platform partner of choice, helping to enable global commerce by connecting the world's leading marketplaces and payment networks." Shares of PayPal have been on a tear this year. The stock is up 30% year to date, and has rallied more than 44% year over year. It began as a pure e-commerce play and the payment option for eBay, which bought PayPal in 2002. Its founders and early employees include Elon Musk, Peter Thiel, Reid Hoffman, Max Levchin, and other members of what's sometimes known as the "PayPal Mafia." It spun off from eBay again in 2015 and has since expanded way beyond online check-out. PayPal is leaning into mobile payments, which makes up roughly 40 percent of its business, and small business lending. Its popular peer-to-peer payment app Venmo has been a part of this growth strategy, and is also integrated with Uber and UberEats. Total payment volume for Venmo grew 73% year over year to $21 billion in the first quarter, the company said this week. Overall, PayPal said it has a total 277 million total customer accounts. Still, it faces fierce competition on a global scale. Tech giants Alibaba and Tencent both dominate consumer finance in China thanks to their popular mobile apps. In North America, Amazon, Google, and Apple are also taking up an increasingly larger share of customers' wallets with their own payment or digital wallet options. Each of those payment methods grew from a "seamless integration" into an existing platform, according to Peter Gordon, CEO of PRMPayments. Alipay is Alibaba's e-commerce payment method. Amazon Pay is embedded into Amazon's platform. WeChat was a communication application in Asia that moved into payments. PayPal could achieve that through Uber. "The point is, these wallets need distribution in e-commerce and mobile applications," Gordon said. "This will align PayPal with Uber as its lead payment method to be distributed globally and allow users to have friction-less experience by entering their PayPal email." Wall Street is also watching PayPal's global ambitions. The MercadoLibre partnership "underscores the global value proposition that PayPal offers other high-growth marketplaces," according to KeyBanc analyst Josh Beck. The firm raised its price target earlier this year to reflect that deal's potential.<doc-sep>Yes, the major public clouds offer a lot. But what you may not know are the limitations, and how open clouds make the difference. Elevate your enterprise data technology and strategy at Transform 2021. (Reuters) — Online payments company PayPal plans to invest $500 million in Uber Technologies Inc as the ride-hailing firm readies to unveil terms for its initial public offering on Friday, Refinitiv IFR reported. PayPal will invest in Uber through a concurrent private placement at the IPO price, IFR reported on Thursday, citing sources. A financial services component is important to Uber as it works to expand into a “superapp” of logistics and transportation services. Superapps are applications where customers go for a range of services, such as transportation, shopping and payments. Such companies can be much more lucrative than those that offer just one core business or service. Uber is expected to tell investors it will seek to be valued at between $80 billion and $90 billion, according to people familiar with the matter. The valuation sought is less than the $120 billion valuation that investment bankers told Uber last year it could fetch, and closer to the $76 billion valuation it attained in its last private fundraising round last year. Uber and PayPal were not immediately available to comment on the IFR report. (Reporting by Ishita Chigilli Palli in Bengaluru, additional reporting by Heather Somerville in San Francisco; editing by Gopakumar Warrier)<doc-sep>A man checks his smartphone while standing among illuminated screens bearing the Uber logo. Online payments company PayPal plans to invest $500 million in Uber Technologies as the ride-hailing firm unveiled terms for its initial public offering on Friday, Refinitiv IFR reported. PayPal will invest in Uber through a concurrent private placement at the IPO price, IFR reported on Thursday, citing sources. A financial services component is important to Uber as it works to expand into a "superapp" of logistics and transportation services. Superapps are applications where customers go for a range of services, such as transportation, shopping and payments. Such companies can be much more lucrative than those that offer just one core business or service. Uber set a price range of $44 to $50 per share for its IPO Friday in an updated filing. It would be valued at about $84 billion at the high end of the range. The company seeks to raise about $10 billion in its IPO. The company will begin its IPO roadshow on Friday. The valuation sought is less than the $120 billion valuation that investment bankers told Uber last year it could fetch, and closer to the $76 billion valuation it attained in its last private fundraising round last year. Uber and PayPal were not immediately available to comment on the IFR report. —CNBC contributed to this report. WATCH: How Venmo makes money for PayPal<doc-sep>
With all the hoopla surrounding Uber’s upcoming IPO, the company is busy rounding up investments to reach its lofty valuation goal of $80 to $90 billion once it goes public. One of these pre-IPO investments includes a whopping sum from PayPal, which is hoping to extend its ongoing partnership with the ride-hailing startup, which dates all the way back to 2013. Since then, Uber’s app has allowed riders to use PayPal as a payment option in the U.S. and Australia. Subscribe to Observer’s Business Newsletter “Today, I am thrilled to announce that we have reached an agreement to extend our global partnership with Uber and intend to explore future commercial payment collaborations, including the development of Uber’s digital wallet,” PayPal CEO Dan Schulman wrote in a LinkedIn post. He also confirmed PayPal’s $500 million private placement to Uber, saying this investment is “another significant milestone on our journey to be a platform partner of choice, helping to enable global commerce by connecting the world’s leading marketplaces and payment networks.” The decision by Uber to create an in-app payment system makes sense, given its ambitions to become a multi-product platform. The company already offers customers non-ride-share services, such as food delivery with UberEats and an electric scooter pilot program, Jump Bikes. Having a proprietary payment system to support the app’s expanding offerings is a smart way to streamline the customer experience. The San Francisco-based company has been prepping for its anticipated IPO with several other valuation-boosting venture capital funding, including a couple of SoftBank-provided billion-dollar rounds for its driverless vehicle program. Uber plans to divest its driverless program into its own unit, so it makes sense to seek massive funding from one of its biggest investors, SoftBank. Uber’s Advanced Technologies Group (ATG)—the leg that operates the company’s self-driving car development—will now run as its own subsidiary. Uber is expected to follow competitor Lyft with a public listing in the coming weeks; it’s set to debut as one of the largest IPOs in American history.