Morgan Stanley’s richest clients are getting a piece of Uber.
According to a report from CNBC, Morgan Stanley’s high-net worth clients will be a part of Uber’s current fundraising round which values the company at $62.5 billion.
This fundraising was first reported back in December.
CNBC reports that $250,000 will be the minimum investment from Morgan Stanley’s high-net worth investors.
Uber’s current fundraising round will be capped at $2.1 billion.
Morgan Stanley declined to comment. Uber could not be reached for comment and this post will be updated if we hear back.
But this investment from some of Morgan Stanley’s most prized clients marks a continuation of one of the most interesting and important themes in tech and finance (fields that are themselves becoming more intertwined): “private markets are the new public markets.”
Commentators from both the tech and finance side of things — notably venture capitalist Fred Wilson and Bloomberg’s Matt Levine — have used this refrain over the last several months as the old dynamic of raising cash privately until some mythical number that encourages companies to go public is reached has been thrown out, more or less.
The short of the idea is that companies like Uber and Snapchat, which conventional wisdom says should be nearing an IPO simply because of their valuations, now have fewer reasons to make a big push for an IPO. The primary financial concern of most young companies is capital availability, and both Uber and Snapchat — among others — have found little difficulty getting funding as private outfits.
And the entry of investors such as high-net worth clients at Morgan Stanley and Goldman Sachs — Goldman’s private wealth clients were involved in a prior round of Uber funding — indicate that demand from non-traditional venture capital-type investors remains robust.
Hence no need for a debut on the public market.
But with the entry of these investors, which have also included mutual funds like Fidelity and T. Rowe Price, startups have in recent months been faced with a new set of challenges. Namely, the much-ballyhooed write-down applied by Fidelity to its stake in Snapchat.
Aswath Damodaran, a finance professor at NYU, said back in the fall that investors like Fidelity had no business being involved with a company like Snapchat. Though Damodaran did note that as the valuation of public tech companies fluctuates, so too should investors expect the value of their private counterparts to vary.
So on the one hand these write-downs make sense. On the other hand some traditional venture-capital-types could perceive these write-downs as a “down round” or something like an admission from investors that a startup isn’t growing as fast as hoped. This, traditionally, was seen as a kiss of death.
The other factor often discussed on this theme is a “reach for yield,” or the idea that in an investing landscape with seemingly scarce opportunities for investors to earn solid returns one must go outside their usual investment area to find good investments.
This theory then brings wealthy investors who typically park tons of money at a large bank like Morgan Stanley to have it evenly spread around the world of widely-accepted investment alternatives to a company like Uber instead.
There is also, perhaps, another discussion to be had about Federal Reserve policy, the skewed expectations of investors, and the changing dynamics of Silicon Valley — Snapchat CEO had an interesting take on this a few years back — but perhaps runs us further afield.
The point here is to note that investors who don’t normally invest in companies like Uber are now investing in companies like Uber. Private markets are the new public markets.
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