SoftBank’s startup woes could cost it billions
Some of Masayoshi Son’s biggest tech bets are leading to multibillion dollar losses.
SoftBank on Wednesday is expected to report a costly writedown on its $100 billion tech fund for the most recent quarter, driven mostly by Uber’s poor stock performance.
“We estimate the Vision Fund to record $4.2 billion of unrealized losses this quarter mainly due to the decline in Uber’s valuation,” Chris Lane, an analyst at brokerage firm Bernstein, wrote in a research note last month.
In the July to September quarter, shares in the ride-hailing company fell 34%. Uber had pared back some of those losses since then, but fell to new lows on Tuesday after the company reported steep losses for the third quarter.
Office messaging platform Slack, precision cancer medicine company Guardant Health and several other publicly traded companies in the Vision Fund portfolio also saw their stock values decline last quarter.
Analysts polled by data provider Refinitiv expect SoftBank to report total operating losses of 48.1 billion yen ($442 million) for the third quarter, compared to operating profits of 706 billion yen ($6.5 billion) for the same period a year earlier.
Drawing a line under the WeWork fiasco
Wednesday’s earnings report also comes on the heels of WeWork’s botched IPO attempt.
SoftBank rescued the struggling startup last month with a roughly $10 billion injection of cash, taking majority control of the company. That bailout was announced after the most recent financial quarter ended, however.
The bailout raised concerns about how much faith — and money — Son places in charismatic founders like WeWork’s Adam Neumann. Neumann stepped down from the company’s board and left his role as CEO, after investors balked at WeWork’s lofty valuation and criticized the company’s governance.
The Financial Times reported that SoftBank is expected on Wednesday to lay out tougher governance standards that would limit the control of start-up founders and restrict dual-class share structures. The new standards will apply to future investments made by SoftBank, and the Vision Fund is in discussions about how it can adopt some of the measures, according to the Financial Times.
SoftBank did not respond to a request for comment from CNN Business about that report.
Brokerage firm Jefferies downgraded SoftBank from buy to hold last month, and called on the Japanese firm to clarify its investment strategy.
The rescue of WeWork sets a bad precedent of “throwing good money after bad,” Jefferies analyst Atul Goyal wrote. It “has shown us that zero is not a valuation floor for any [SoftBank] asset holding,” he said.
Before the bailout, the Vision Fund and SoftBank had already invested nearly $11 billion into WeWork. When SoftBank participated in a funding round back in January, the startup was valued at $47 billion.
SoftBank’s rescue package valued WeWork at about $8 billion — less than half the total amount of money SoftBank and the Vision Fund have poured into the company.
