SoftBank Slump Reaches $16 Billion as Ride-Hailing Luster Dims

(Bloomberg) -- In the months leading up to Uber Technologies Inc.’s market debut, Masayoshi Son made a habit of pointing out that SoftBank Group Corp. is the world’s largest investor in ride-hailing companies. Suddenly, it doesn’t seem like such an enviable position.

SoftBank has lost about $16 billion in market value in the past three trading days as Uber plunged nearly 20% below its IPO price. On Tuesday, the Tokyo-based company’s shares fell 5.4%, the biggest decline since Dec. 25. The overall market was also down, with the Nikkei 225 Average retreating 0.6% amid escalating U.S.-China trade tensions.

SoftBank Slump Reaches $16 Billion as Ride-Hailing Luster Dims

Just two months ago, Son told the audience at the Milken Institute conference in Tokyo that SoftBank controls 90% of the ride-hailing market worldwide through its portfolio companies which also include China’s Didi Chuxing, Southeast Asia’s Grab and India’s Ola. But, as shares of Uber and smaller publicly-traded rival Lyft Inc. went into a tailspin, that bet is beginning to look increasingly like a risk factor.

Key Insights

  • Uber closed 11% percent lower at $37.10 on Monday, approaching what Wedbush analyst Daniel Ives called “white knuckle” territory. Lyft dropped about 6%.
  • In addition to the $7.7 billion investment in Uber, Son and his $100 billion Vision Fund have poured more than $10 billion into Didi, $3 billion into Grab and $2.25 billion in General Motor Co.’s self-driving unit Cruise.
  • SoftBank shares climbed to a 19-year high ahead of Uber’s IPO, thanks to a record 600 billion yen ($5.5 billion) share buyback announced in February. On Tuesday, the Japanese company said that all of the ammunition has been spent, with 100% of the purchase already completed.
  • The performance of Uber and Lyft has also raised questions about investor appetite for IPOs of large startups that prioritize growth over profitability. WeWork Cos., where SoftBank is also the biggest shareholder, is another money-losing giant which announced plans for listing.
  • “The key point is not just how Uber was trading on its first day, but given the market conditions, can it absorb yet another big IPO like the loss-making WeWork,” Amir Anvarzadeh, a market strategist at Asymmetric Advisors Pte, said in a note to clients.

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