SoftBank posts $6.5b operating loss after WeWork, Uber writedowns

SoftBank's Masayoshi Son at a press conference in Tokyo on Aug 7 2019

Japan's SoftBank takes major hit after WeWork valuation tumbles

Japanese investment group Softbank reported on Wednesday that it had lost almost $6.5 billion on Uber, WeWork, and other companies in its portfolio for the quarter ending September 30. But investors balked at buying shares in the money-losing startup and WeWork pulled its IPO.

SoftBank's investing activities are propped up by other pillars of Son's empire including domestic telco SoftBank Corp., which on Tuesday reported a 9 percent rise in second-quarter operating profit, beating estimates, buoyed by its cash-cow mobile business.

WeWork's parent, the We Company, was forced to abandon an initial public offering of its shares on United States stock markets at the end of September after investors queried the huge valuation given to the office space rental company.

On Wednesday, SoftBank's chairman took some blame for his poor decisions.

"There was a problem with my own judgment, that's something I have to reflect on", he said, looking more sober than usual in gray suit, white shirt and pink tie.

But the entrepreneur then launched into a spirited defense of his track record. "But let me explain the facts". The two funds together made a quarterly loss of 970bn yen.

SoftBank agreed a $US9.5 billion rescue package with WeWork last month in exchange for an 80% stake in the ailing business. The US$100 billion Vision Fund, the unprecedented investment fund that had been producing big profits, lost 970.3 billion yen.

With this, the company has said that it has ended the quarter with 88 investments at cost totaling $70.7 Bn, with fair value amounting to $77.6 Bn (excluding exited investments). Analysts had predicted a charge to be in excess of $5 billion and as much as $7 billion.

In the July to September quarter, shares in Uber fell 34%. Softbank invests in a wide array of companies, including Chinese e-commerce conglomerate Alibaba; car-sharing companies Uber, Didi and Grab; Internet company Yahoo and the Internet of things, or IoT, Britain-based company Arm. He said the company had "special circumstances", but in general SoftBank wouldn't put more funds into companies in which it had invested simply to rescue them from failure. SoftBank has said it didn't get a majority of voting rights, meaning its troubled investee will be treated as an associate, not a subsidiary - potentially keeping its balance sheet free of some $22 billion of debt and $47 billion in looming lease-payment obligations.

It is also haemorrhaging money, with sources saying it must raise at least $3 billion to cover its financing needs through the end of the year.

SoftBank's flamboyant founder Masayoshi Son has faced renewed scrutiny of his investment acumen in the wake of WeWork's dramatic fall from grace. The remaining capital is now reserved for investments in existing portfolio companies (including investments in joint ventures with them), fixed distributions, and finance related expenses.

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