Uber Offers 109% Returns for Chinese With $500,000 to Spare

If you’ve still got a spare half-million dollars after the global market rout, Uber Technologies Inc.’s got a deal for you.

The ride-hailing company is seeking to raise at least $100 million from wealthy Chinese willing to put in a minimum of 3 million yuan ($469,000) each, according to copies of an offer sheet circulated to investors and seen by Bloomberg.

Dangling estimated returns of as high as 109 percent, the “Project U” offer would put at least 80 percent of the money into shares of closely held Uber before an expected initial public offering in 1 1/2 to 2 years, while the remainder would go into stakes of the company’s separate China arm, according to the document.

Such lucrative payoffs could come with big risks, particularly in China, where Uber lags far behind a market leader that’s backed by the country’s two biggest Internet companies. Uber is planning to invest more than 7 billion yuan to expand to 100 Chinese cities by 2016 from the 16 it operates now, according to the document.

“The short-term competitive environment is going to be tough, which may have an influence on investors,” said Kirk Boodry, a Singapore-based analyst at New Street Research SG Pte. “We don’t know if Uber will succeed in China or not, but it may be that they get a smaller share of the market than they might have originally anticipated.”

The recent rout in global stock markets could also make it harder to raise money, Boodry said.

$50 Billion

Still, for Chinese able to meet the minimum investment threshold, the document says it’s a chance for them to put money into a company with an estimated valuation at $50 billion.

Uber plans to be in 500 cities worldwide by year end, raking in orders of $9.8 billion this year, $20 billion in 2016, and at least $50 billion in 2017, by starting operations in a new city every two days, according to the document. Uber didn’t immediately respond to a request seeking comment.

While the Chinese arm is valued at only $7 billion, Uber estimates the unit could generate returns of as high as 109 percent, versus about 76 percent for Uber’s global business, according to the offer sheet. Still, the Chinese arm would list only after five years in Hong Kong or in mainland China, according to the document.

And if Uber China doesn’t list, investors would be able to sell their shares back for cash, plus compounded interest, or convert their holdings into stakes in Uber’s global company, according to the document.

For the Wealthy

Just as Uber sought to raise $1.6 billion from wealthy Goldman Sachs Group Inc. clients in the U.S., the company is marketing its shares in China via Citic-CP Asset Management, a joint venture between Citic Trust and Citic-Prudential Fund Management that specializes in selling wealth management products to rich investors. A Citic CP representative declined to comment.

Uber faces tough competition in China from bigger rival Didi Kuaidi, which is backed by Internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Didi Kuaidi accounts for 78 percent of the country’s private car business, according to market research firm Analysys International.

Didi attracted state-owned Beijing Automotive Group Co. as an investor in its latest funding round, people familiar with the matter have said. Beijing Auto joins sovereign wealth fund China Investment Corp. as investors in Didi, according to the people.

— With assistance by Shai Oster, Alexandra Ho, and Heng Xie

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