SoftBank Sees Wider Loss of $8.4 Billion on WeWork Writedown
SoftBank Sees Wider Loss of $8.4 Billion on WeWork Writedown
(Bloomberg) -- SoftBank Group Corp. forecast a wider net loss for the fiscal year ended in March, adding 150 billion yen ($1.4 billion) to its prediction from just two weeks ago because of deeper difficulties at the office-sharing startup WeWork.
The Japanese company said it now expects to lose 900 billion yen, after estimating previously its net loss would total about 750 billion. The hit related to WeWork accounts for about 700 billion yen of the non-operating losses, including investments and loan commitments. The Tokyo-based company bailed out WeWork last year after its failed stock offering and has since taken control of the business.
SoftBank founder Masayoshi Son has been struggling with the impact of the coronavirus on the portfolio of startups he has backed in recent years. Companies such as Brandless Inc. have shut down, while satellite operator OneWeb filed for bankruptcy last month. SoftBank is writing down the value of investments made through its $100 billion Vision Fund and on its own.
Son bet heavily on the so-called sharing economy, in which startups help people split the use of cars, offices and homes. Those businesses, already struggling with high operational costs, have been hammered by the pandemic that has discouraged much direct human interaction.
“Son is getting the bad news out there,” said Justin Tang, head of Asian research at United First Partners. “Everyone is looking forward to a lifting of lock-downs and easing back to normality.”
SoftBank is scheduled to report final earnings for the fiscal year on May 18. SoftBank shares were little changed in Tokyo trading, while the Japanese stock market rose.
SoftBank last month boosted the size of a planned share repurchase to 2.5 trillion yen. That has lifted shares that had fallen about 50% from their peak earlier in the year.
The company kept its full-year outlook for a 1.35 trillion yen operating loss unchanged.
“The impression is that they are being more aggressive in including WeWork-related losses,” said Shinji Moriyuki, an analyst at SBI Securities. “That should help reduce risk further down the road.”
Last year, after WeWork’s effort to go public fell apart, SoftBank stepped in to organize a $9.5 billion bailout and put its own chief operating officer, Marcelo Claure, in charge of turning around the business. Earlier this year, the Japanese company scrapped one part of the agreement -- to buy $3 billion of shares from existing shareholders, including former Chief Executive Officer Adam Neumann.
Under SoftBank control, WeWork has been offering some tenants discounts to minimize cancellations following government-mandated coronavirus quarantines, which have forced non-essential employees globally to work from home. The New York-based company also hasn’t paid April rent for some locations and is approaching landlords regarding rent abatements, revenue-sharing agreements and other lease amendments as it seeks to trim liabilities, people with knowledge of the matter have said.
Son’s investments in hotel-booking service Oyo Hotels & Homes and Uber Technologies Inc., among the biggest in his portfolio, have also fared poorly, swelling losses in the Vision Fund. It probably wrote down about 1 trillion yen in assets in the March quarter, based on its earlier earnings reports. SoftBank didn’t detail all the startups that took hits. Oyo, in which SoftBank invested about $1.5 billion, earlier this month furloughed employees in countries outside its home market of India as it struggles to survive the virus. Uber’s shares are trading about 30% below its IPO price.
“The bad news seems to be out for now,” said Tang of United First Partners. “But you never know how many skeletons there are in the closet.”
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