Uber for tech financial analysis proves elusive

NEW YORK: If only there was an Uber for analyzing tech unicorns. Bank regulators have expressed displeasure over how Morgan Stanley, Goldman Sachs and other advisers pitched a loan for the $70 billion ride-hailing enterprise.

Imaginative slicing and dicing of figures is an irksome dark art performed by investment bankers. At the same time, the Federal Reserve's guidance on leverage can be hard to apply to unprofitable ventures.

Silicon Valley's widespread use of numbers that stray from standard accounting practices is finally getting more intense scrutiny from the Securities and Exchange Commission.

Separately, the Fed and the Office of the Comptroller of the Currency have been cracking down on how much companies borrow.

The two phenomena converged last summer when Uber took the rare step among technology firms of raising money in the leveraged loan market. To sell the $1.2 billion loan, Uber's bankers touted its performance in established markets while glossing over huge losses in places like Asia, according to a Reuters report this week.

This so-called "ring-fencing" drew criticism from financial watchdogs. Soon after securing the new funds, Uber sold its China operations to local rival Didi Chuxing.

Corporate clients know well how investment bankers contort themselves into sitting atop the league tables in any situation and their expertise at putting a company into the best possible light. Similarly, no fund manager contemplating lending to Uber should have been surprised to see arrangers emphasize the US business over, say, cash-burning efforts in India.

Investors also might have been more beguiled by Uber's lofty valuation and its estimated $9 billion stockpile of cash at the time of the debt deal.

Watchdogs want borrowers in leveraged transactions to be able to repay a loan by half within seven years - roughly $140 million a year in this case at a 5 percent yield - but that sort of rule of thumb can make less sense for a company aggressively trying to grow. Uber may have lost a whopping $2.8 billion in EBITDA last year, according to The Information.

Although it can sometimes feel like trying to wedge a square peg into a round hole, it is in everyone's best interests that the Fed and its Washington cohorts keep hammering home the importance of telling as straight a financial story as possible.