Softbank’s latest financial reports reveal an overall operating loss of 1.36 trillion Yen and a net loss of 961.6 billion Yen recording the conglomerate’s worst losses in its 39 year history. The disastrous numbers come as an aftermath of its Vision Fund business losing 1.9 trillion Yen in the last fiscal year.
Company founder Masayoshi Son’s $100 billion vision fund went from the main benefactor of profits to being the biggest drag for the Tokyo-based conglomerate’s earnings. The fund’s $75 billion investment in 88 start-ups was only worth $69.9 by the end of March. The fund booked losses of about $10 billion from WeWork and Uber Technologies alone. Both companies smeared the company’s report owing to the cab agglomerate’s disappointing public market debut in May followed by an implosion of WeWork in September.
After a $10.43 billion infusion into WeWork, the office sharing firm is now valued at only $2.4 billion. To deepen the trench, Son is now dealing with the impact of coronavirus on his portfolio of start-ups which are heavily dependent on the sharing economy.
Due to the virus, Son’s investment in the hotel-booking service Oyo has also fared poorly. The business has had to furlough employees outside its home market as it struggles to survive the virus.
Pertaining to the worst financial climate the conglomerate has seen, Softbank has been forced to pledge sale or monetise $41 billion in assets. As concerns about investments mounted, Son responded with two share buybacks in rapid succession. A 500 billion Yen repurchase announced in mid-March initially failed to lift Softbank’s stock. When shares plunged by 30% in the following week, Son unveiled a 2 trillion yen follow up.
Softbank also recorded losses in its own investments, including WeWork and satellite operator OneWeb, which filed for bankruptcy in March. Regardless, the reports have attracted critique that the company is dominated by Son and doesn’t reveal enough detail on how the valuations that drive its profits are reached.
The situation had undoubtedly provided more leverage to activist shareholder Elliot Management which is pushing for more transparency and oversight. Meanwhile, with Alibaba founder Jack Ma departing the SoftBank board, the conglomerate will be cutting ties with its largest asset in the portfolio and a likely target for asset sales.