Here's What Morgan Stanley Is Telling Its Wealthiest Clients About Uber

No financials, but a number of risk factors.

What's Morgan Stanley Saying About Uber?

Wealthy clients of Morgan Stanley and Bank of America just got dibs on shares of the unlisted Uber Technologies, but that doesn't mean they're getting a chance to see the ride-sharing company's financials, according to an offering document seen by Bloomberg News.

The 290-page offering sent by Morgan Stanley has shares priced at $48.77 apiece, based on a valuation of $62.5 billion, similar to previous estimates.

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But you'll have to take the bank's word for that valuation: While the document sets out a number of so-called risk factors for clients interested in buying shares of the unlisted company, it does not include basic financial data such as net income and official annual revenue figures.

"Given the Company's sustainable competitive advantages, large market opportunity, and growth prospects of the Company, the Investment Team believes that the pre-money equity valuation for the Company of $62.5 billion or $48.772228 per share is reasonable," the offering says.

Jim Wiggins, a spokesman for Morgan Stanley, declined to comment.

Here's what caught our eye from the offering doc.

A mention of a future IPO ...

"In the event of an initial public offering by the Company, the Fund intends to make an in-kind distribution to its partners of common shares of the Company, following the expiration of any applicable lock-up periods and subject to appropriate legal, tax, and regulatory considerations, however the Manager will continue to evaluate all potential exit opportunities with respect to the Fund's Investment. … Upon the closing of an initial public offering of the Company that generates net proceeds of the Company of at least $30 million, the Series G Preferred Stock will automatically convert into Class A Common Stock, a then-applicable conversion price."

And its possible delay ...

"There are a number of factors that could impact the Company's timing on when to go public, potentially having it occur later than expected or not at all. ... These risks include, but are not limited to: volatility in the market prices and trading volumes of companies operating in the same and similar industries to the Company, general economic weakness, and deterioration in the Company's financial performance. Alternatively, the Company could be acquired by a company with a strategic interest in the car sharing business. In the event of an acquisition, of the Company, the holders of the Series G Preferred Stock would receive an amount per share based on either the Series G Preferred liquidation preference or their percentage ownership of the Company after converting their shares to Class A Common Stock...There are a number of risks that could results in the Company not being acquired or being acquired at a price significantly below the original purchase price of the Series G Preferred Stock."

Risks related to the independent contractor's issue ...

"The Company is incurring significant costs, including legal fees, in defending the independent contractor status of drivers using its platform. Although the Company believes that it is not an employer of the drivers who use its platform, adverse determinations in these matters may subject it to additional compensation expenses or taxes in certain jurisdictions, which could have a material adverse effect on its ability to operate its business. Among other things, such a determination could entitle certain drivers using the Company's platform to the reimbursement of certain expenses, lead to the potential unionization of drivers, impose tax withholding and reporting obligations on the Company, entitle drivers using the Company's platform to the benefit of wage-and-hour laws, impose applicable leaves of absence requirements, medical insurance, workers compensation insurance, ERISA and similar pension fund obligations and restrictions on the Company."

Pressure on profit margins ...

"The Company anticipates that, as its market becomes increasingly competitive, maintaining and enhancing its brand may become increasingly difficult and expensive. ... The Company has incurred significant net losses since inception and the Company expects it operating expenses to increase significantly in the foreseeable future. ... A significant portion of the Company's expenses and investments are fixed, and it may not be able to adjust its spending quickly enough if its revenue is less than expected."

A move into untested international markets ...

"In the third quarter of 2015, jurisdictions outside the United States accounted for approximately 60.4 percent of all rides provided by drivers using the Company's platform. The Company expects this proportion to increase but can provide no assurance such increase will occur. The Company has limited experience operating in these jurisdictions and is making significant investments to build its international operations and compete with local competitors."

A note on growing pains...

"Since its inception, the Company has experienced rapid growth in the United States and internationally. This expansion increases the complexity of the Company's business and places significant strain on management, personnel, operations, systems, technical performance, financial resources and internal financial control and reporting functions...As the Company's operations have expanded, it has grown from 158 employees on December 31, 2012, to 4,900 employees on September 30, 2015, of whom approximately 1,537 were located outside of the United States."

And trouble at airports ...

"Airports where the Company conducts business regulate service providers picking up and dropping off travelers at the airport. Although the company's platform is generally available to drivers that provide these services to travelers, some drivers have not obtained the required permits from applicable airports. As a result, several airports have banned drivers from using the Company's mobile platform within airport boundaries."

A footnote

Clients who do opt to invest in Uber will do so through a fund called New Riders LP and will most likely have to stump up a minimum $250,000 for the privilege. The fund is expected to close in the first quarter of this year and will be subject to a performance fee equal to 0.25 percent of their investment. And while it doesn't appear that wealthy clients will get a direct look at Uber's financials, they will get unaudited semiannual financial statements from New Riders.

Editor's note: This article has been updated to include details of the performance fee and another risk factor.

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