It seems the WeWork pain is seemingly endless for Softbank. After already announcing Vision Fund losses to the tune of $14.8 billion two weeks back, the company today announced booking of an addition $9.6 billion in losses, from investments made outside of the Vision Fund. And out of that $9.6B, $6.6 billion accounts to guess who? WeWork.
The company still stands by its earlier estimate of record breaking annual operating loss at 1.35 trillion yen, which was announced earlier this month. The company has had more than just a rough year, with its $100 billion investment fund returning nothing but sour fruit. Investments into startups that failed, or are failing, caused the company’s profits to slip, way before coronavirus became a thing.
In terms of these additional losses coming to light, SoftBank said a newly recognised non-operating loss of ¥700bn on WeWork arose from the “fair value measurement” of the bailout package it had provided to the company back in 2019. The package, totaling $8Bn, included a $1.5bn cash fuel as well as $2.2bn in debt and a $1.75bn line of credit for WeWork. There was an additional $3 Billion tender offer to buy shares of founder Adam Neumann and certain investors, but it was recently rescinded by the Japanese conglomerate. WeWork has since sued Softbank for the same.
The company had already poured in a whopping $13.5 billion in the office sharing startup, which was already dying. COVID 19 did it no favors, and made the slowdown even more vigorous.
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.
Investors however remained largely undeterred with the announcement. Shares in SoftBank rose as much as 3.6 per cent on Thursday to ¥4,775 despite the additional losses. But that is largely because investors have already written off the value of WeWork investment.