SoftBank takes another costly hit
TOKYO — SoftBank Group has taken another multibilliondollar hit from its ambitious but costly bets on once highflying companies like Uber and WeWork, putting growing pressure on the Japanese conglomerate to get its financial house in order.
The company and its founder and CEO, Masayoshi Son, have dominated the world of technology investment through the $100 billion Vision Fund. More recently, the company has become a target for hedgefund giant Elliott Management, which has been urging changes at the Japanese firm, including governance overhauls and stock buybacks.
On Wednesday, SoftBank may have given Elliott another reason to complain. It said the Vision Fund and other investments cost its bottom line $2 billion in the final three months of 2019.
Overall, SoftBank reported a profit of about $501 million for the quarter, well short of what investors had expected. Its profit was less than onetenth of what it had posted a year earlier. Its operating profit fell 99%.
In a presentation to investors and analysts Wednesday, Son suggested that he would slow the Vision Fund’s torrential pace of fundraising and investing.
Asked about the status of raising money for a planned $108 billion second iteration of the Vision Fund, Son said that SoftBank’s recent challenges had “caused concerns among potential investors,” adding that he had “received a lot of feedback from people, and we are actively engaging in discussions.”
Son said that SoftBank would continue making new investments.
“Once potential partners are more comfortable,” he added, “they will join us.”
Despite the huge losses, Son did not appear chastened. Instead, he played down concerns about SoftBank’s future, dismissing worries about its enormous corporate debts and its underperforming investments in a number of quixotic tech firms.
Focusing on the positive, he cited SoftBank’s victory in the United States this week related to Sprint, the wireless carrier that the company has spent heavily to support. On Tuesday, a judge approved a merger between Sprint and TMobile to form a more powerful competitor to rivals like AT&T and Verizon.
The deal is one of the few bright spots in what has been a tough year for SoftBank. In February 2019, the company was riding high. WeWork and Uber, two companies in which it had invested heavily, planned to sell shares to the public, raising hopes of high valuations and big returns.
Since then, SoftBank has weathered a number of setbacks. The most spectacular was the cancellation of WeWork’s initial public offering. In November, SoftBank said it had lost $4.6 billion on its investment in WeWork.
Uber’s IPO was disappointing. Softbanks’s stake in dogwalking startup Wag was sold at a loss.
Son has often urged investors to ignore shortterm fluctuations in the values of the company’s investments, saying that he is making longterm bets that he believes will fundamentally change major industries.
During his presentation Wednesday, Son showed a slide that from one angle appeared to be a duck but seen from a different one looked like a rabbit. The picture, he said, was a metaphor for how some analysts were taking the wrong perspective on the company.
“The market view is still skeptical of us, that SoftBank might go bankrupt,” he said. “But that tide is turning.”