SoftBank Vision Fund Posts $17.7 Billion Loss on WeWork, Uber

(Bloomberg) -- SoftBank Group Corp. said its Vision Fund business lost 1.9 trillion yen ($17.7 billion) last fiscal year after writing down the value of investments, including WeWork and Uber Technologies Inc.

The company posted an overall operating loss of 1.36 trillion yen in the 12 months ended March and a net loss of 961.6 billion yen, according to a statement on Monday. The Tokyo-based conglomerate released figures in two preliminary earnings statements last month. The losses are the worst ever in the company’s 39-year history.

SoftBank founder Masayoshi Son’s $100 billion Vision Fund went from the group’s main contributor to profit a year ago to its biggest drag on earnings. Uber’s disappointing public debut last May was followed by the implosion of WeWork in September and its subsequent rescue by SoftBank. Now Son is struggling with the impact of the coronavirus on the portfolio of startups weighted heavily toward the sharing economy.

“The situation is exceedingly difficult,” Son said at a briefing discussing the results on Monday. “Our unicorns have fallen into this sudden coronavirus ravine. But some of them will use this crisis to grow wings.”

The drop in Uber’s share price was responsible for about $5.2 billion of Vision Fund’s losses in the period, while WeWork contributed $4.6 billion and another $7.5 billion came from the rest of the portfolio, SoftBank said. The $75 billion the Vision Fund has spent to invest in 88 companies as of March 31 is now worth $69.6 billion.

SoftBank also recorded losses from its own investments, including WeWork and satellite operator OneWeb, which filed for bankruptcy in March.

Last year, after WeWork’s effort to go public fell apart, SoftBank stepped in to organize a bailout and put its own chief operating officer, Marcelo Claure, in charge of turning around the business. But the pandemic has hammered its operations as workers shy away from gathering in shared office spaces.

WeWork’s valuation is now $2.9 billion, down more than 90% from its peak. SoftBank has invested more than $10 billion in the company.

Son’s investments in hotel-booking service Oyo Hotels & Homes and Uber, among the biggest in his portfolio, have also fared poorly. Oyo, in which SoftBank invested about $1.5 billion, last month furloughed employees in countries outside its home market of India as it struggles to survive the virus. Uber’s shares are trading about 28% below its IPO price.

As the concerns about investments mounted, Son responded with two share buybacks in rapid succession. The first 500 billion yen repurchase announced in mid-March initially failed to lift SoftBank’s stock. When the shares plunged more than 30% in the week that followed, Son unveiled a 2 trillion yen follow-up.

SoftBank has already used roughly half of the first allotment. The company said on Friday that it had bought 250.6 billion yen of its own stock since March 13 under the original re-purchase plan.

Before the earnings were announced on Monday, the company said it plans to spend up to 500 billion yen more to buy back shares through next March. The announcement is part of a broader plan to sell assets to raise as much as 4.5 trillion yen over the coming year to buy shares and slash debt. SoftBank is likely to raise the funds by selling its stakes in Alibaba Group Holding Ltd., Japanese telecom unit SoftBank Corp. and the company that results from the merger of Sprint Corp. and T-Mobile US Inc.

SoftBank said on Monday that it entered into several prepaid forward contracts with banks in April and May using Alibaba shares to procure a total of $11.5 billion. That includes a $1.5 billion forward contract with settlement in April 2024, a $1.5 billion floor contract with settlement in Dec. 2023 and Jan. 2024, and a $8.5 billion collar contract with settlement from Jan. to Sept. 2022.

Separately, SoftBank said that Jack Ma, co-founder of Alibaba, will step down after 13 years as a director, part of several board changes subject to approval at the general shareholder meeting in June. Three new directors have been nominated. In addition to SoftBank Chief Financial Officer Yoshimitsu Goto, Lip-Bu Tan and Yuko Kawamoto will join, bringing the total of external board members to four. Kawamoto will be the first female director.

Son’s increasingly risky bets over the past few years coincided with departures from SoftBank’s board of some of it most outspoken members. Shigenobu Nagamori, the founder of motor maker Nidec Corp., stepped down in 2017, while Fast Retailing Co. Chief Executive Officer Tadashi Yanai left last December. When Paul Singer’s Elliott Management Corp. disclosed in February that is has built a stake of close to $3 billion in SoftBank, one of its requests was to increase the number of independent directors.

“Activist investors might choose to stay in the background for now, given all the sensitivity around the Covid-19 impact. So these new independent director appointments and the buybacks are clearly a small win for Elliott,” said Justin Tang, head of Asian research at United First Partners. “But once the Covid-19 fallout is behind us, I am certain they can and will push for more change.”

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