Uber chief unlocks $136mn in options after beating $120bn valuation target

Uber chief executive Dara Khosrowshahi has received options to buy stock worth about $136mn after hitting a performance target to secure a $120bn valuation for the ride-hailing company.

The award, set before Uber’s 2019 stock market flotation, had looked unlikely to be met for most of its life as a public company as it struggled with persistent losses that ran into the tens of billions of dollars.

But Uber’s results have recently improved under Khosrowshahi. The company said in a recent filing that the CEO’s performance target had been met after its equity value averaged at least $120bn on a fully diluted basis over 90 trading days to February 6. 

Khosrowshahi was hired in 2017 from Expedia, where he was once the best-paid chief executive in the S&P 500. To compensate him for $160mn in options he gave up on leaving Expedia, Uber agreed that he would receive options over 1.75mn shares if the $120bn target was met and he stayed in post for five years. Other executives also had compensation potentially worth millions tied to the threshold.

The ride-hailing company said the package was “necessary given the challenges that Uber faced in 2017 and the critical role that he would play in Uber’s transformation plan”.

Uber’s recent performance contrasts starkly with its lacklustre public listing in 2019, when it failed to meet hopes for a valuation of $100bn or more amid concerns over steep losses and battles with regulators.

For years the shares traded at about or less than the $45-per-share IPO price, which gave the company a market capitalisation of approximately $82bn.

But Uber’s stock has jumped by almost 150 per cent over the past 12 months in response to a turnaround. Since taking over, Khosrowshahi has cut costs to boost margins, offloaded non-core businesses such as autonomous vehicles, and found revenues in new areas such as advertising. Earlier this month Uber announced its first share buyback.

That has helped lift Uber’s market value to more than $160bn. It is higher on the fully diluted basis used in the performance target, which also counts untraded stock, including large amounts awarded as equity to employees in recent years.

According to filings, Khosrowshahi, chief legal officer Tony West and chief people officer Nikki Krishnamurthy now have the rights to buy a collective total of 2.25mn shares, which are worth about $175mn at Uber’s current share price, at between $33 and $41 each.

Khosrowshahi’s options are priced at $33.65 each, so they would cost him $59mn to exercise. They expire in September, and he plans to exercise them, though not “within the next 90 days”, according to a February filing. West and Krishnamurthy have options that are exercisable until 2028.

Uber’s former chief financial, operating and technology officers lost their rights to options over a collective 2mn shares that were also tied to the $120bn threshold, because all three left the business, departing between 2019 and 2023.

Khosrowshahi’s pay package is not unusual for Big Tech chief executives. Apple chief executive Tim Cook was paid nearly $100mn in 2021. Alphabet chief Sundar Pichai saw his total pay rise to $226mn in 2022, thanks to a giant stock award. Amazon’s Andy Jassy was awarded more than $200mn in stock when he took over from Jeff Bezos.

Additional reporting by Patrick Temple-West in New York