In what seemed almost certain, Japanese tech behemoth Softbank announced today, that it is anticipating a staggering $24 billion loss, largely due to its massive multi-billion bets in WeWork, OneWeb and the larger Vision Fund. In totality, the entire conglomerate is expecting losses to the tune of $7 billion for the year.
Softbank’s Masayoshi Son has been, for the past couple of years or so, putting around billion of dollars globally, in what many have termed extremely risky early-stage bets. Some examples of those multi-billion dollar failures include coworking startup WeWork (whose IPO failed miserably, along with gross corruption within the company) and the satellite company OneWeb (recently announced bankruptcy). Softbank’s other bets, like the one in India’s Oyo, aren’t looking too good either. Uber, where Softbank invested heavily, has failed to rise over its IPO subscription price, even once.
The money that Softbank has invested over the years, was through its highly reported ‘Vision Fund 1’ (and yes, there is a second one coming as well), which included some of the biggest names as investor partners. Of course Softbank bet its own massive fortune in it, generated largely through its stake in Alibaba and its core telecom business in Japan. On a side note, Softbank’s core business in Japan is also facing massive headwinds.
The Vision Fund probably wrote down about 1 trillion yen in assets in the March quarter, based on its earlier earnings reports. SoftBank didn’t detail all the startups that took hits.
“The difference in income before income tax is, in addition to the above, mainly due to the expected recording of non-operating loss totaling approximately JPY 800 billion for fiscal 2019 on investments held outside of SoftBank Vision Fund, including The We Company (WeWork) and WorldVu Satellites Limited (OneWeb),” the company said in a statement. “This will be partially offset by the gain relating to the settlement of variable prepaid forward contract using Alibaba shares recorded in the first quarter of fiscal 2019 and the dilution gain from changes in equity interest in Alibaba recorded in the third quarter of fiscal 2019, as well as an expected year-on-year increase in income on equity method investments related to Alibaba.”
Softbank’s own admission of how miserable its investment ‘vision’ is, will further dent an already collapsing second iteration of the Vision Fund. According to reports that came earlier this year, Vision Fund 2 is nowhere near its expected $108 billion close. At that point of time, the fund had failed to reach even half its value, with most money coming in through Softbank.
With the massive losses that Softbanks is anticipating now, whatever was left of the Vision Fund 2 (outside of Softbank), will surely not be there. And hopefully so.