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SoftBank to reportedly face SEC probe after Nikesh Arora’s unexpected exit: Bloomberg

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SoftBank’s been hitting us with curveballs the past week. First, by denouncing allegations against Nikesh Arora and then, the sudden departure of the very same man from the firm. There’s something fresh brewing now. We’re now hearing that the U.S Securities and Exchange Commission are reportedly examining SoftBank’s practices.

The SEC probe has stemmed from the fact that even though Arora has been handed a clean chit from the special committee to look into the alleged conflict of interest, then why did he resign as the president last week?

Sources close to the matter, told Bloomberg that the SEC office is now looking into whether Arora had conflicts of interest or engaged in questionable behavior. It is also looking into SoftBank’s disclosures to its investors. It is important to note that opening an SEC inquiry in such an important matter is just a preliminary step. It doesn’t in any way accuse either the Japanese Internet giant or Arora of any wrongdoing.

In a statement to the publication, SoftBank added that,

SoftBank Group does not comment on press reports of regulatory inquiries.

It notes, however, that a special committee of independent members of its board of directors, acting with the assistance of independent counsel, reviewed the allegations in the purported shareholder demand concerning the conduct of its former president and chief operating officer. The special committee concluded that claims were without merit.

Allegations

Nikesh Arora was brought on the Tokyo tech giant’s board in 2014. Son – one of the richest man in Japan – named him the primary candidate to succeed him at SoftBank. But once Arora took the presidential position, he was flooded with allegations questioning his integrity and business practices.

In addition to these allegations, a group of investors who wanted him to be removed as director had sent a long 11-page letter to the company’s board. They also criticized Arora’s poor investment performance and ‘questioned transactions’ completed under his tenure. Some anonymous investors also raised concerns about his alarming and intolerable compensation, which was in the north of $100 million in his first year.

SoftBank, however was always present to defend Arora and his practices in the public. Even billionaire chairman Masayoshi San has full faith in Arora and released a statement saying that,

I have complete trust in Nikesh and one thousand percent confidence in him and know he will continue to do great things for SoftBank in the future.

Clean Chit

Tokyo-based Internet giant SoftBank Group Corp had formed a special committee consisting of the board of directors to look into the matter. After the special review, the committee had concluded that the allegations against Arora are without merit. It conducted its review with the assistance of independent counsel at Shearman & Sterling LLP and Anderson Mori & Tomotsune.

And this wasn’t a complete shocker because the company had complete trust in him. Son again released a statement reiterating his belief in Arora saying that,

As I said when these allegations first became public, I have complete trust in Nikesh and I am pleased the special committee has looked into these claims thoroughly and concluded they are without merit.

Indian-origin Nikesh Arora, who was the heir to the SoftBank throne has been widely credited for channeling’s the firms money into the Indian startup ecosystem. It is now one of the largest investor in Indian startups, having pumped over $2 billion into the likes of Snapdeal, Ola, InMobi, OYO Rooms, and Housing.com.

Sudden Departure

This was the most shocking news that we heard the same-day that SoftBank announced that Arora was non-guilty and all acquisitions against him were baseless. Arora stepped down from his role at the firm saying that he didn’t want to be stuck waiting for the CEO position. He wanted to go out and explore his options.

He made the decision to step down when Masayoshi son decided that he was still too young and wanted to continue at the helm of the company. He didn’t want Arora to take over his position next year as had been promised to him. In a statement, Son added that,

I was thinking of handing over my job as CEO when I turn 60, but thought maybe I’m still a bit too young, and still have energy to continue.

In addition to this, he also added that he has always put the company’s vested interests first and none of the comments have any substantive bearing to them. Commenting on his departure, Arora finally expressed his gratitude towards SoftBank for the opportunity and said that,

Helping Masa begin the transformation of SoftBank and sowing the early seeds has been a great experience. I have enjoyed working with Masa and the SoftBank team and I look forward to my next challenge. In the meantime I will continue to support SoftBank and our investee companies.

Post Arora’s step down, Softbank announced that it has elected the head of its telecom operations, Ken Miyauchi as Representative director, president & COO post the resignation of Arora.


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