Uber took a Zomato stake for exiting India, lost $707M on it in six months, then sold

In early 2020, after years of aggressive attempts to compete with Zomato and Swiggy, Uber sold its Uber Eats business in India to Zomato for $206 million. As part of the deal it received a 9.99% stake in the loss-making Indian company.

On 2 August 2022, TechCrunch reported that Uber planned to sell its remaining 7.8% holding as early as Wednesday through a block deal of more than $350 million, working with Bank of America Securities. Uber, which reported a $2.6 billion net loss for the second quarter, said it had taken an unrealized loss of $707 million on the Zomato investment in the first half of 2022.

Zomato shares had performed poorly throughout the year and fell to an all-time low the previous week, after the lock-in period for pre-IPO investors ended. The stock closed at 55.55 rupees (72 cents), giving Zomato a market cap of $5.5 billion against $13.2 billion on its debut day a year earlier.

A $707M unrealized loss in the first half of 2022 on a stake received for selling Uber Eats India for $206M.

Uber accepted a minority stake in Zomato as part of the price for leaving Indian food delivery after years of trying to compete with local rivals.

Zomato's shares fell sharply through 2022, and dropped further once pre-IPO investors' lock-in ended.

The TechCrunch source described only an unrealized, mark-to-market loss; any realised result depended on the price Uber got in the block sale.

Taking shares as payment for an exit keeps you exposed to the buyer's stock. Decide upfront whether the stake is a strategic holding or a position to sell into the lock-up end.

Uber planned to sell its entire 7.8% stake in a block deal worth over $350 million. Zomato said that day that it aimed to reach EBITDA break-even by the fourth quarter of the following year and had marked down its Blinkit quick-commerce investment from $400 million to $320 million.