Uber (Part 3a) - A primer on valuation

One of the fundamental questions of strategy: "Is the prize worth the chase?" 

The purpose of this third post is to provide a short primer on business valuation, so readers better understand the link between Uber's recently established private-market-based valuation of $50b and the strategic imperatives implied for the managers tasked with earning into it.

In this series' first post I laid out my conclusion that Uber's "prize is likely not worth the chase."  In the second post I laid out an analysis & discussion framework in support of that view.  Section 3 of that framework proposed a quick revenue-multiple valuation which was used in section 4 to develop a view of those strategic imperatives - essentially, what you'd have to believe about Uber in order to invest.

This primer is centered around supporting my choice of a ~5x revenue multiple valuation for a "mature" Uber as reasonably conservative, then asks what else we might consider since a revenue multiple clearly doesn't highlight enough value.

Prizes and chases contain both financial and other considerations (such as wait time, political capital, happiness, etc).  Though it makes many people uncomfortable to do so, almost any consideration can be reduced to its financial equivalent through highlighting the implicit trade-offs being made.  Often, people are surprised to see how much (little) they implicitly "value" a non-financial consideration.

"Unknowable" financials can usually be reduced to scenario descriptions of "what you'd have to believe."

This post has four sections:

1. The "intrinsic value" of a business is based on replacement of its free cash flows (essentially revenue minus costs), the so-called "Discounted Cash Flow" (DCF) analysis
2. Revenue multiples are often used to compare companies' valuations because it's a quick and easy shortcut to a full DCF. 
3. Revenue multiple is close enough for our purposes, and it's more transparent than a full DCF
4. Other valuation techniques could help us ballpark the value of access to Uber's user network.  Valuing Uber's network at $100/user shows one way to narrow the valuation gap

Disclaimers/disclosures: This author is not an investment banker and holds no professional licenses upon which a reader can rely.  These posts are not investment advice.  This author does have professional experience in M&A which enables him to identify and build off expert valuation assessments for use in the context of a strategic discussion.  Any errors here are solely my own and not those of the links I included.  See end of post for more detail

1.  "Intrinsic value" of a business is based on purchasing a replacement of its free cash flows (essentially revenue minus costs), the so-called "Discounted Cash Flow" (DCF) analysis

Note: Readers familiar with the basics of corporate finance including DCF models and Miller/Modigliani are invited to skip ahead to section 2.  The following is simplified as much as this author felt appropriate, though not more.  Readers of section 1 who are familiar with GAAP may wince at my cavalier use of several terms of art

A steady stream of unending cash is valued using a formula called a perpetuity

Single period discounts

• I would be willing to pay $100 today in exchange for receiving $100 simultaneously
• If instead I would receive the $100 one year from now, I would want to either pay less than $100 today, or receive more than $100 in a year.  This difference is called interest
• The interest rate I would choose would depend on several risk factors
• If my annually compounded interest rate were 10%, I would be willing to pay $90.91 today, for $100 in a year, because $90.91 *110%=$100
• Depending on which side of this transaction I'm on, I'm either the borrower or the lender
• This $90.91 is also called the Present Value (PV) of receiving the $100 in a year

Multiple period discounts

• If I would receive $100 after Year 1, and another $100 after Year 2, I already know how much I'd pay for the first year's repayment.  How much for Year 2?
• For Year 2, I'd pay $100 divided by ((1 plus 10%) squared), or $82.64
• This checks, because $82.64 * 110% * 110% = $100 (well, if you round)
• So I'd pay $90.91 + $82.64 = $173.55 today in exchange for $100 in a year, and another $100 in two years... if my interest rate were 10%
• You can do this for any set of payments, in any direction, and add them up.  When you're adding up cash flows in both directions, it's called Net Present Value (NPV) because you're netting out the payments made/received

Infinite period cash flows

• If I would receive $100 per year forever, the math works out to a general formula of payment divided by interest rate, or $100/10% = $1,000.  This is called a perpetuity
• You could work this out yourself manually using Excel... the PV of the 100th year's payment is seven tenths of one cent, etc.  Note the lower the interest (discount) rate, the more of the value comes from later year cash flows.  At 10%, more than half the value comes from cash flows after year 7 (at 5% it's after 14 years)
• If the cash flow itself is growing with time, there's a more general formula for the Net Present Value (NPV) of the perpetuity; note that this is even more heavily back-weighted

All else equal, a company's intrinsic value is the sum of its future cash flows: fundamentally unknowable, but some value estimates are less wrong than others

An ownership stake in a company is a legal claim on its future free cash flows - the amount of money that is leftover after paying all its expenses.  For a variety of reasons free cash flow is different than accounting profit.

You could imagine doing the same type of NPV calculation as above, but doing it for a company.  It has to pay workers and suppliers money today, to build products, which it sells, and is then handed money by customers.  When done for this purpose, the basic math is the same but there are many more moving pieces.  Instead of one big formula you're predicting lots of individual cash payments, happening at different times, and discounting them back to the present.  This is called a Discounted Cash Flow (DCF) analysis.

As a financial investor, there is a price you're willing to pay today based on the expected future cash flows of a company and the DCF is a good way to begin.  Of course, predictions are very hard to make - especially about the future.  Costs, prices, efficiency gains, competitive moves... these tend to make the future challenging.  And choosing the correct discount rate (cost of capital) is a science in and of itself.

Some of this works itself out through something like the Central Limit Theorem - many of the individual elements of the valuation can be wrong, but if done properly the errors can cancel themselves out in a way that retains the DCF's utility.  Other broad methodologies include liquidation value, relative value, and contingent claims (options) value.

In the end, something's price is whatever someone's willing to pay at that very moment.

All else equal, high-margin businesses are worth more (if you have to pay costs up front)

It's easy to see that if two companies have $100 in revenue, and one has $10 in profits but the other has $50 in profits, the second one is worth more.  What we're focused on here is different... when is $50 in profit from one company worth more/less than $50 in profit from a similar company?

Imagine two companies in different industries, both delivering $100/year in perpetuity of free cash flow.  Company A has $40 in expenses ($140 in revenue), Company B has $200 in expenses ($300 in revenue).  Imagine both having identical cost of capital (interest rates) for the purposes of this exercise

• If expenses are paid at the same time revenue arrives, both companies are worth the same amount of $1,000 (despite B appearing to be 3x A's size!)
• If expenses are paid at the beginning of the year, A is worth 20% more
• The FCF value of A is $960
• A's revenue stream is worth 140/.1=$1,400
• A's cost stream is worth -40 (up front cost) + -40/.1=-440
• The FCF value of B is $800
• B's revenue stream is worth 300/.1=$3,000
• B's cost stream is worth -200 (up front cost) + -200/.1=-2200
• In reality, things are much more complex.  
• Also, bigger companies tend to have more negotiating power, and can sometimes get money from their customers before they have to pay their suppliers.  When this happens, a company with higher costs can be worth more despite having the same level of profit.

All else equal, low capital intensity businesses are worth more

Imagine two identical companies that look a lot like A above, both with $40 of costs paid at the beginning of the year, and $140 in revenue, paid at the end of the year.  We said their FCF value was $960

Company C grew itself to this position organically - it has no debt.  Company D grew itself through borrowing, and has $400 in perpetual debt (like the US government, it pays only interest and never principal)

Couple of observations:

• Company D is automatically worth less, because its interest on the debt reduces its free cash flow.  If it pays 5% on debt, that's $20/year in interest.  Perhaps its free cash flow only gets reduced by $16 because of tax effects.  But that's still 16/.1=$160 less in Enterprise Value (EV), so D would be worth 960-160=$800
• It gets worse for D... if the two companies are otherwise identical, C could immediately take out a loan for $400 and just pocket the money.  Then it would be worth the $800 of D but also have $400 of cash in its pocket... so C is really worth $800+$400=$1,200 (at least until it paid a dividend)

However... this is only really true ex post.  If you asked the question of where D got the money to grow (that C had to borrow), and the businesses were otherwise identical, then D got its money from paid-in equity.  A central tenet of Miller/Modigliani is that capital structure of a given firm doesn't matter except for tax effects.

Because interest on debt is tax deductible, a firm gets a one-time dividend by borrowing a whole lot of money; the PV of the dividend is higher than the PV of the interest payments, because (a) it reduces the taxes paid, and (b) the interest rate on debt is below the firm's overall cost of capital.  (Of course this may push it closer to bankruptcy.)

So... a firm with less debt than its twin should be worth more ex-ante because at any moment it could borrow money and pay it out as a dividend.  This is a basic play from the Private Equity playbook.

Why do software companies generally carry so little debt and so much cash?  One reason for a cash stash in software is the P/E boost that cash gives... the underlying value of the earnings are the same, but a company with more cash has a market value which necessarily includes the cash, so the numerator in that fraction is higher.  Since software companies are evaluated by naive commentators on P/E ratios, perhaps software execs deliver high P/E ratios in part to satisfy the peanut gallery

Another reason for the cash stash may be defensive for disruptions/downturns - while Apple is often noted for a large and growing pile of cash, it seems to be growing in line with their business: cash/short term plus long-term investments been pretty consistent at about 1.2-1.5x their COGS since at least 2010.  (Note this is similar but different to a current ratio... perhaps it also has a name)

2.  Revenue multiples are often used to compare companies' valuations because it's a quick and easy shortcut to a full DCF.

Relative valuation techniques are often a useful shortcut to a full-blown DCF.  Relative techniques are especially useful to quickly identify companies which are priced out of line with their peers, and closer inspection can often reveal factors which may help explain the value difference.

One of the issues with a DCF is most of its value comes from far in the future (because most of a firm's value is predicated on its ability to remain in business as a going concern, just like the perpetuity in section 1).

At the end of a DCF analysis a "terminal value" is calculated by extending the assumptions to infinity.  And just like the perpetuity, the later years is where most of the value is.  So if you're wrong about terminal value you're wrong about the value in a way that negates all your hard work in the front half of a DCF.  Why not just save yourself some work: start with some high-level assumptions about cash flow in the near term, and extend them into the long term?

Revenue multiple valuation is a specific type of relative valuation.  It can be quite useful because in addition to enabling easy comparison among peers it also tracks directly to a DCF using a much simpler set of assumptions.  Enterprise Value (EV) is the whole value of the firm (debt + equity); EV/revenue is a type of revenue multiple, useful also because it ignores distortions from competitors having different capital structures.

An example revenue multiple calculation

For company A in section 1, the free cash flow value is $960, and it's annual revenues are $140.  If this firm had only equity, and the total value of its traded equity were equal to $960, it's EV would also be $960.  So its EV/sales ratio would be 6.86

Company B has a DCF value of $800, and its annual revenues are $300.  Ceteris paribus, B's EV/sales would be 2.67.

Why so different?  A has operating margins of 71% (100/140), but B has operating margins of only 33% (100/300).  The underlying value is similar, but this ratio is highlighting the difference between their operating margins.  This is less of an issue when making comparisons within an industry, as most competitors have a similar cost structure.

Revenue multiples are easiest to compare when the companies have similar margins, overhead, and growth rates... which is often true of industry peers

If Company E was 10x the size of Company A, but all else was equal, E would have revenues of $1,400, costs of $400, annual free cash flow of $1,000, and an EV of $9,600 (1,400/.1 minus 400/.1 minus 400)

It's easy to see, ceteris paribus, that E's EV/sales would also be 6.86 (9600/1400).  This is because A and E are exactly the same company, just at different scales.  If they were both growing at the same rate as their industry, their revenue multiple would be the same (though their value would be 10x different).  If A and E traded on different revenue multiples, it would be a sign that investors saw differences between future margins or growth rates in one of the companies.

Software is a particularly "clean" industry to use revenue multiples because of Zero Marginal Cost [8/18 also stability of recurring revenue and convergence of cost structure among firms, of course]

In most businesses, selling another widget will incur production/distribution costs because of just that widget.  This is called the marginal cost of production.  These often change over time, especially when involving labor costs (always goes up, unless offset by productivity) and commodity costs (cyclical, but often not in a helpful way).  Often there are limitations in passing cost changes through to customers in pricing.  These combination of factors can make future margins challenging to model accurately.

A pure software company incurs virtually no marginal cost of production.  The extra copy of the software is downloaded by the customer, installed by the customer, and maintained by the customer.  Of course there are still overhead costs - R&D, development, marketing - but most of those are relatively invariant to sales.  And value-based pricing often means that your revenues will tend increase with the costs of the customer whose issue you are solving, all else being equal.

Of course few software businesses are purely ZMC - plus they have variable costs such as sales (Customer Acquisition Costs, or CAC) and customer service that grows (hopefully) linearly with revenue.  Early stage companies which are testing out sales/growth models often have costs that are unsustainably high in this area due to experimentation and acceleration.  Once they have "cracked the code" on their business model, many are able to transition into a more sustainable cash flow.

The average public zero-growth software company would have a revenue multiple of ~2.4x based on the perpetuity formula; in practice, they average about 3x in part due to sustainable revenue growth

Page 14 of the Software Equity Group's 2014Q2 report gives some average statistics of 135 public software companies (Note: I have no affiliation with SEG, but am assuming they can compile reasonably accurate stats):

• EV/Revenue of about 3.0
• 68% gross margins
• 18% EBITDA
• 8-9% annual revenue growth
• Average cash on hand was $156m on $460m in revenue, or about 34% of revenue

If we use the perpetuity formula for a company of revenues of 100 and a 3x valuation, we get something like 18/(r-g) + 34 (cash) =3*100.

In this equation r-g=.0538.  With a g of 8% the implied r (discount rate) is about 13%.

Is r=13% reasonable?  Consider the risk-free rate and the equity risk premium.  Ballparking it, on Aug 13th the 30-year T bill rate is 2.86, the Aug 1st ERP for the S&P 500 is 5.72.  That's 8.58% for r.  So we're missing something...

• Perhaps there's a risk these companies will slow their growth
• Using the numbers above, at zero growth our "average" public software company is worth 18/.0858+34= 243, or 2.4x revenue

What about a company worth 6x revenue?  A company with a higher revenue multiple is some combination of safer, higher growth, or higher margin.  Mostly higher growth.  (Note also that really fast-growing companies may appear to have g>>r, which yields a useless answer in the short term.  It's really an artifact of not knowing the correct risk premium, which is likely much higher than the market as a whole)

Revenue multiples aren't perfect, but they're a solid first-order approximation in the software world

This isn't the technically correct way to do a revenue multiple valuation, but it illustrates the linkage between it and valuing the free cash flow of a software company.  Here's Bill Gurley on the topic: "not all revenue is created equal."

In the Uber (Part 2) framework we noted a couple of companies' revenue multiples:  "On 8 Aug 2015 the EV/revenue ratio of Facebook is ~19x, LinkedIn is ~10x, Google is ~5x, and SAP is ~4.5x"

Look at the financials of these companies, particularly their gross margins, EBITDA, operating margins, revenue growth rate, and EV/revenue multiple.  Look at Salesforce (~8.5x on 14 Aug 2015).

Each has strong financials (gross margins and cash flow/EBITDA); as growth slows and margins erode each takes its own path but revenue multiples decline towards the industry mean of ~3

3.  Revenue multiple valuation is close enough for our purposes, and it's more transparent than a DCF

I'm less interested in the theoretical actual value of Uber and more interested in the strategic implications of their latest fundraising.  Recall that in July 2015 Uber raised $1 billion on a $50b valuation, and based on press coverage were burning about $500m/month earlier in the spring.

Without inside knowledge, it's impossible to know the details of these expenses.  Even with inside knowledge, it may be difficult to forecast costs with any accuracy, or to know if/when the business will require fewer legal battles and driver/rider incentives.  Perhaps Uber will able to turn that corner this fall, at least to the point where the mature cities can fund the new cities.  A DCF analysis is subject to considerable assumptions and pushback; Prof Damodaran estimated Uber's intrinsic value at $6b in June 2014 (based on 10% share of a $100b market at 20% platform margins) and received just such commentary.

If Uber is able to self-fund their growth, then their valuation is material only when they're trying to use their stock to pay employees or make potential acquisitions.  Any concerns of dilution may not be resolved until there's another formal valuation, which might not happen until an IPO (not sure if private market transactions would trigger that).

If Uber is unable to self-fund their growth, then the valuation becomes immediately material - there is likely to be considerable "negotiation" among existing shareholders and new investors when seeking needed capital.

By using a revenue multiple, we are able to ask ourselves what Uber might look like once it's already won.  Because mature software companies, even ones still growing, have values of 5x revenue and below, we can use this as a lightweight framework.  We can take the basic parameters of platform margin and back into the kind of "win" Uber will need to have won just to break even on their current valuation.

When we do that, we demonstrate that the intrinsic value issue for Uber is less about finding a big enough market, and more about (a) defending platform margins; and (b) paying for the expansion as Uber grows into that market.

4.  Other valuation techniques could help us ballpark the value of access to Uber's user network.  Valuing Uber's network at $100/user user shows one way to narrow the valuation gap

In the "Thinking out loud" part of Section 5 of my Uber (Part 2) framework post, I discussed the possibility that some of Uber's value could come from the value of its data - either the data exhaust itself, or some 4th party willing to pay Uber in a way that subsidizes Uber connecting a particular driver with a particular passenger.

This is worth exploring, as my default assumption should be that investors (new & existing) made a reasonable valuation decision.  Perhaps they were misguided, but I should first try to see how they might be right.

Data exhaust is likely a real source of value, but (at least today) is a small market

In late 2014, DataCoup founder Matt Hogan was quoted as estimating the market for personal data at about $15b globally.  His company was founded to shift some of that value back towards users whose data is being sold.

I didn't find much in a five-minute search on the data market globally.  WalMart generates a significant amount of retail data for its own use.  Insight Research International does this for the Consumer Packaged Goods industry, about a $2 trillion annual market in the US alone (2009).  Neilson is the largest US Market Research firm, with $3.2b in annual revenue.  IAI has $500m in revenue (that report estimated US-based market research spending as $16.8b annually, indicating perhaps I misread the Matt Hogan quote above)

It seems unlikely that detailed ride data is worth more than detailed spending data on the $2 trillion CPG market, even once accounting for improved infrastructure spending.  So this idea seems unlikely to be more than a couple-hundred million to maybe a billion dollar revenue market for Uber, and highly consultative (valuations maybe 1-2x revenue).  A solid side project, but likely not worth more than an hour/week of Travis Kalanick's time

Per-user: the value of viewing Uber as a social network

Any 4th party willing to pay Uber would be the equivalent of Uber's social network having value.  

It's hard to imagine in practice how this would work - a taxi ride incurs real marginal cost to deliver the passenger in a way that heavy use of Facebook doesn't.  And even $5 is probably too much to pay for an "impression" (a going rate is $20/1,000 impressions on CNN, much less on YouTube).  But what if Uber became a social network platform?

Fortune magazine has reported that social media companies have a valuation of about $100/user.  Growth in these companies' (Facebook, LinkedIn, Twitter, etc) valuation has mostly tracked growth in the user base, at a value of about $100/user.  In early 2014 Facebook was valued at $128/user despite annual revenue per user of only $6.48.  

Perhaps these other social companies are overvalued, but several have persisted in this valuation well past their IPO.  Perhaps this is what Uber has been arguing to their new investors.  It's not clear what gets you into the "social network valuation" club.  Groupon clearly wasn't valued at $100/user.  Is Ford?  Microsoft?  Google?  Spotify?  Blue Apron?  Craigslist?

Uber had 8 million users  in July of 2014, when their annualized ride revenue was about $1.5 billion.  And in January 2015, Uber had 160,000 drivers.  If Uber's user-base grows linearly with ride revenue, at $50b in rides perhaps they'd have 266m users.  At $100/user, their "social network" could add $27b to their market cap.  Perhaps they need to target an even higher value/user.

"Only" $100/user would still be quite useful, and could close much of the valuation gap (though perhaps wouldn't help the cash flow gap).  But is it real?  Presumably, at some point Twitter, Facebook, etc will need to monetize their user base or see that valuation decline back towards cash-flow fundamentals.

So if Uber's excess value is due to "social" I would remain fairly skeptical.

What if Uber could charge passengers a subscription fee, an "Uber Prime"?

Of course, Uber users are (currently) much less engaged than social media users when not in a cab, so maybe a user wouldn't be worth $100.  And I would expect a bimodal distribution of Uber users in an 80/20 fashion, where a handful of people are using it very frequently - meaning the value of the median user may be much less than average.  And as the user-base grows in non-Western countries, perhaps the average value of a user would drop as well.

A value of $100/user at a 3x revenue multiple means $33/year/user in platform revenue.  At 20% margins, this is a bit over $150/year in taxi rides.  The July 2014 numbers above (8m users, $1.5b in ride revenue) suggest each user averaged $187/year in rides.  If accurate, the $100/user valuation could be achievable for Uber.  

Of course, these early adopters are likely the heaviest users in the most expensive cities.  And incentives to drivers/passengers likely distort these numbers significantly.  So maybe not sustainable as it grows.

What if Uber kept the target of $33/year/user in platform revenue, but instead of earning it as a percentage of the ride got it instead as a subscription fee from the rider?  I'd probably pay $30/year for access to the Uber network, especially if it gave me guaranteed service times and exempted me from surge pricing.  Maybe more, in the latter case.  You could imagine several levels of pricing, perhaps per-city and network-wide; probably at yearly (not monthly) renewal to help stickiness and predictability.

If Uber could combine an access fee with a driver cap (employees?), it might be able to escape some of the brutal economics it's experiencing that were discussed in Section 4 of Uber (Part 2).  Drivers and passengers would be stickier, there would be less/no leakage in Uber's network density.

Like Amazon Prime, Uber prime could generate a solid revenue base and make the platform margins much less dependent on individual transaction profitability.  Amazon competitor Jet launched on this model earlier in 2015 - the idea being that the company would limit its operational expenses to its subscription base and pass through its purchasing power directly to subscribers.  Like a giant online Sam's Club.

Would be interesting to see if a user subscription could cement a winning position for Uber, perhaps in combination with captive drivers.

Conclusion

TL;DR "Is the prize worth the chase?" is a question at the core of any organizational (or individual!) decision-making, although it's often made implicitly rather than through explicit reasoning.

Good business strategy makes theories of action appropriately explicit.  This enables execution plans at different levels to be developed and refined in a coordinated manner, as well as granular course-correction diagnostics which appropriately distinguish between the need for small and large changes to the plan. [8/18 A good primer on SaaS valuation is here; we'll return to some of these ideas at the end of the blog series]

In this post we expanded on the narrative framework from Uber (Part 2).  Our current Uber story, restated, that we'll continue to explore over the coming weeks:

1. Uber's need to raise cash to fund growth may be increasing their valuation faster than they can close the gap operationally
2. The end market is plenty big, but defending platform margin seems at least as important than revenue growth in the short term - especially from a cash flow perspective
3. Competing ride share services are placing pressure on rates and platform margins, possibly because drivers "waiting" on multiple platforms prevents Uber's relative size from translating into a competitive advantage
4. Uber may be much less overvalued than at first glance if viewed as a social network and/or could charge an annual subscription fee + ride fee to a meaningful number of users

Thanks for reading,
Greg



Disclaimer(s):  This author's views on Uber are solely his own.  They are not a "fairness opinion."  Facts are sourced from openly available data on the internet, and presented in order to illustrate general business concepts.  Someone with access to Uber's internal data may come to much different (and more accurate) conclusions.  

The short-term price of anything is whatever the highest bidder is willing to pay for it, subject to the seller's agreement to complete the transaction.  When demand is high, winning bidders may overpay.  When demand is low, cash-strapped sellers may be forced to part with something they'd rather keep.

Much of corporate finance focuses on the difference between an asset's cost, underlying value, and market price.  This price may be higher or lower than the underlying asset value for a wide variety of reasons including such things as operating synergies which would occur under a more appropriate owner.  

Case in point: This author once spent three months on an M&A due diligence team evaluating the proposed merger of two electric utility companies.  Despite confirming the likelihood of several billion dollars in annual operating savings, we recommended against the merger.  

Our "no" recommendation was based on rules the client's PUC had in place governing how operating costs (and savings) were passed through to consumers/rate-payers.  These rules required savings to be phased into electricity rates after three years.  My team estimated it would take three to five years for full run-rate savings to take effect because of factors like purchasing cycles and capital equipment longevity.  As a result, the owners (stockholders) of the utilities would bear the full cost and risk of the merger, but almost none of the increased profits.

For a more thorough treatment of valuation of companies, readers are directed toward two seminal texts: "Valuation" by McKinsey's Tim Koller (et al) and "Valuation" by NYU's Prof. Aswath Damodaran.  Most of the latter's book chapters, lectures, presentations, etc are available here.

In the spirit of even fuller disclosure, this blog author once had the rare privilege of spending five weeks on a $50b+ M&A due diligence team which included Tim Koller virtually full-time.  Prior to McKinsey, Tim was an early lieutenant of Joel Stern (of Stern/Stuart and EVA).  This author audited Joel Stern's EVA class at Carnegie Mellon (Tepper) in the early aught's while studying toward his MBA.  

This is not to make an authority-based argument (especially since those M&A experiences were over a decade ago in very different industries); instead to highlight this author's particular familiarity with experts in corporate valuation and ability to follow their general logic.

Prof. Damodaran's original views on Uber's intrinsic value are contained here.  After receiving considerable push-back from Uber-loving readers, Prof. Damodaran provided an update (here) which included an interactive valuation tool.  He challenged readers to use the tool to build their own valuation, and find a set of beliefs which would result in Uber's future success being worth $17b.  

In the nine months since Prof Damodaran's second post, Uber's market-based valuation has surpassed $50b.  I invite particularly motivated readers to use Prof Damodaran's tool to create an alternate narrative in support of a $50b valuation.  Or an alternative relative valuation tool.  

Successful readers are implored to share the results in the comments section below.