SoftBank Vision Fund posts $17.7 billion loss on WeWork, Uber Technologies

Son’s increasingly risky bets over the past few years coincided with departures from SoftBank’s board of some of it most outspoken members.
SoftBank Group said its Vision Fund business lost $17.7 billion last fiscal year after writing down the value of investments, including WeWork and Uber Technologies. The losses are the worst ever in the company's 39-year history.

The group also doubled the amount it plans to spend buying back shares and announced changes to its board, including the resignation of long-time director Jack Ma. The company plans to repurchase as much as $4.7 billion worth of its own stock by March 2021, it said, That’s on top of an equal sized repurchase it had announced in mid-March.

SoftBank founder Masayoshi Son's $100 billion Vision Fund went from the group’s main contributor to profit a year ago to its biggest drag on earnings. Uber's disappointing public debut last May was followed by the implosion of WeWork in September and its subsequent rescue by SoftBank. Now Son is struggling with the impact of the coronavirus on the portfolio of startups weighted heavily toward the sharing economy.

“The situation is exceedingly difficult,” Son said at a briefing discussing the results on Monday. “Our unicorns have fallen into this sudden coronavirus ravine. But some of them will use this crisis to grow wings.”

The Tokyo-based company also announced several changes to its board, including the departure of Ma, the co-founder of Alibaba Group Holding. Three new directors have been nominated, including Chief Financial Officer Yoshimitsu Goto. SoftBank shares rose as much as 3 per cent.

SoftBank, led by founder Masayoshi Son, is buying back shares to bolster its stock price after its portfolio of start-up investments lost value. The company expects to book a record 1.35 trillion yen operating loss for the year ended March 31 when it reports financial results Monday afternoon in Tokyo. After aggressively investing in startups in recent years, SoftBank is marking down the value of stakes in companies such as WeWork, Oyo Hotels and Uber Technologies Inc.

“The buyback announcement is a surprise, given the slew of low expectations and bad news,” said Justin Tang, head of Asian research at United First Partners.

SoftBank plans to fund the buybacks in part through the sale of stakes in Alibaba and T-Mobile, Bloomberg News has reported. SoftBank is now in talks to sell a “significant portion” of T-Mobile US to controlling shareholder Deutsche Telekom AG, Dow Jones reported. The company said on Friday that it had bought 250.6 billion yen of its own stock since March 13 under the original re-purchase plan, about half of the 500 billion yen budget.

That first buyback, announced in mid-March, initially failed to lift SoftBank’s stock amid concerns the conglomerate’s portfolio of startups is vulnerable to the economic shock from the coronavirus pandemic. When the shares plunged more than 30 per cent in the week that followed, Son took an unprecedented step to unveil a broader plan to repurchase as much as 2 trillion yen, without detailing the timing. The latest announcement is part of that broader plan.

“Son is also sending a message that he is serious about funding that 2 trillion yen buyback he announced in March,” Tang said.
The stock gained almost 70% since SoftBank said it plans to sell assets to raise as much as 4.5 trillion yen over the coming year to buy shares and slash debt.

The company’s Vision Fund business, focused on technology investments that contributed more than half of its reported profit a year ago, has swung to a projected 1.8 trillion yen loss. The company’s overall net loss will likely reach 900 billion yen.

Son’s increasingly risky bets over the past few years coincided with departures from SoftBank’s board of some of it most outspoken members. Shigenobu Nagamori, the founder of motor maker Nidec Corp., stepped down in 2017, while Fast Retailing Co. Chief Executive Officer Tadashi Yanai left last December. When Paul Singer’s Elliott Management Corp. disclosed in February that is has built a stake of close to $3 billion in SoftBank, one of its requests was to increase the number of independent directors.

Ma’s departure is a historic moment since he and Son have sat on each other’s boards for years. Alibaba is regarded as Son’s most successful investment. In addition to Goto, a long-time SoftBank veteran, Lip-Bu Tan and Yuko Kawamoto will join, bringing the total of external board members to four.

Tan is a founder and chairman of Walden International, a venture capital firm based in San Francisco, and CEO of Cadence Design Systems Inc. He holds a master’s degree in nuclear engineering from the Massachusetts Institute of Technology and received an MBA from the University of San Francisco.

Kawamoto is a professor at Waseda University whose subjects include corporate governance. She holds a bachelor’s degree in social psychology from the University of Tokyo, a master’s degree in development economics from Oxford University and spent years working at McKinsey & Co. Kawamoto will be SoftBank’s sole female board member.

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