Dara Khosrowshahi, the chief executive officer of Uber, has been awarded options to purchase stock valued at approximately $136 million after successfully achieving a performance target aimed at securing a $120 billion valuation for the ride-hailing company.
According to a Financial Times report, the award, established prior to Uber’s initial public offering in 2019, appeared improbable for much of the company’s public existence due to persistent losses amounting to tens of billions of dollars.
However, Uber’s recent financial performance has shown improvement under Khosrowshahi’s leadership.
CEO’s performance target
According to a recent filing, the CEO’s performance target was met as Uber’s equity value averaged at least $120 billion on a fully diluted basis over a 90-day trading period ending on February 6.
Khosrowshahi, who joined Uber in 2017 from Expedia, where he once held the position of the highest-paid chief executive in the S&P 500, received compensation for relinquishing $160 million in options upon leaving Expedia.
As part of the agreement, Uber agreed to grant him options over 1.75 million shares if the $120 billion valuation target was achieved and he remained in his role for a period of five years
Additionally, other executives also had compensation packages potentially worth millions of dollars tied to the attainment of this valuation threshold.
The report noted that 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 $100 billion or more amid concerns over steep losses and battles with regulators.
Uber’s stock
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 $82 billion.
But Uber’s stock has jumped by almost 150% 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 $160 billion. 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 2.25 million shares, which are worth about $175 million 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 $59 million 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.
Big Tech chief executives
Khosrowshahi’s pay package is not unusual for Big Tech chief executives. Apple chief executive Tim Cook was paid nearly $100 million in 2021. Alphabet chief Sundar Pichai saw his total pay rise to $226 million in 2022, thanks to a giant stock award. Amazon’s Andy Jassy was awarded more than $200 million in stock when he took over from Jeff Bezos.
