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Softbank Bullish Despite 6.5 Billion Loss

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TOKYO — SoftBank Group, The Japanese investment powerhouse on Wednesday reported its first quarterly operating loss in 14 years – about US$6.5 billion. It took in a charge of about US$4.6 billion for WeWork, whose implosion turned the once high-flying shared-office startup into its dire state today. Son nevertheless defended the $100 billion Vision Fund’s track record and said SoftBank’s shareholder value was at a record high, in a bullish display of confidence in his group’s overall strategy.

Late in October 2019, WeWork secured a US$9.5 billion rescue package from SoftBank, a deal which Softbank took over 80 per cent of the company. That’s on top of the more than US$10 billion SoftBank and its Vision Fund have already invested into the coworking giant.

The key reason for WeWork’s mounting losses was that many of its buildings were new and had low occupancy rates, he said. Now, WeWork will sell off unprofitable ventures, stop taking out new leases and focus on buildings that are over 12 months old and which have higher margins. 

“As a result, expenses will be halved,” Son said. “Naturally, the break-even point will move forward, and the profit at the building level increases dramatically. The answer is simple,” he claimed.

Still, investors such as billionaire hedge fund manager Bill Ackman, believe there is a high probability that WeWork is worth zero.


The Vision Fund

The Vision Fund also suffered from declines in the valuations of more than 20 of its 88 companies. Son said, however, that many more had gained in value since the fund’s inception and the net result was a US$11 billion paper profit. 

Apart from WeWork, SoftBank invests in an array of technology-driven companies, including Chinese e-commerce conglomerate Alibaba; car-sharing companies Uber, Didi and Grab.

Son pointed out that while Uber’s share price has fallen recently, it has risen since SoftBank invested in it. He has also promised a turnaround at WeWork; sending in SoftBank Chief Operating Office Marcelo Claure, who oversaw the merger at Sprint, to lead WeWork and beef up its corporate governance.

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