SoftBank in Crisis Amid Record Losses


TOKYO — His flagship tech fund is losing money. His company just posted billions in losses. And a key ally, the Chinese technology mogul Jack Ma, stepped aside.

Yet Masayoshi Son, the exuberant chief executive of the Japanese conglomerate SoftBank, mustered another spirited defense of his troubled empire on Monday, shifting from contrite to brash and back again in a performance that sought to both reassure investors and restore his own bruised reputation.

Mr. Son gave his financial presentation just hours after SoftBank announced that Mr. Ma, a co-founder of the Chinese e-commerce giant Alibaba, had resigned from its board. That news was quickly followed by an earnings report describing losses that were the largest on record for any listed Japanese company, according to NHK, the Japanese public broadcaster.

The dismal results were driven largely by SoftBank’s big bets on a series of technology-related companies that had once been the darlings of the start-up world. Those included WeWork, the office space company, and Uber, as well as poor showings by other companies that have been hit hard by the coronavirus pandemic.

The company’s losses were slightly higher than its estimates, and the Vision Fund reported a loss of $17.7 billion.

With the pandemic in mind, SoftBank joined other major corporations in declining to forecast its earnings for the coming fiscal year. Because of the virus, it said, “it remains difficult to forecast the medium-term impact on the company’s business and financial results.”

The results are a downfall for the Vision Fund, which upended the start-up investment world when it began writing large checks to young tech companies in 2017. Mr. Son was called a “one-man bubble maker” for pushing companies to supersize their ambitions while giving them enough cash to ignore the pesky chore of turning a profit. Competing venture capital firms had to raise larger funds to keep up.

Mr. Son was an early investor in Alibaba. His $20 million initial stake grew to be valued at more than $100 billion, making it one of the best venture capital investments in history and among SoftBank’s most valuable holdings.

The company has used those assets as collateral to help transform itself from a telecom firm into the world’s largest and most powerful tech investor. Through the Vision Fund, financed in part with money from sovereign wealth funds in Saudi Arabia and Abu Dhabi, Mr. Son pumped enormous amounts of capital into cutting-edge and often risky start-ups, companies that he believes have the potential to effectively monopolize entire industries.

In a note to employees about the latest cuts, Uber’s chief executive, Dara Khosrowshahi, said it was time for the ride-hailing company to move on from its reliance on venture capital.

“We must establish ourselves as a self-sustaining enterprise that no longer relies on new capital or investors to keep growing, expanding and innovating,” he wrote in the email, which was seen by The New York Times.

The money to finance it, Mr. Son confirmed during his presentation, came in part from sales of the company’s position in Alibaba.

In a presentation that started with a funereal tone and ended with a breath of fire, Mr. Son defended SoftBank’s performance, switching between playing up and playing down the threat of the pandemic to the Vision Fund’s investment portfolio.

Speaking to what appeared to be an empty room, he presented a PowerPoint deck that began with a history lesson about the Great Depression before going on to quote statistics about the impact of the coronavirus on the global economy — data on everything from the drop in restaurant sales to the rise in layoffs.

One slide showed a herd of unicorns — a nickname for companies valued at $1 billion or more — running up a hill and plunging into a pit labeled “Valley of the Coronavirus.” One of them sprouted wings, an image that Mr. Son said represented how some of the Vision Fund’s investments, particularly those in the medical sector, would “lead the rebound.”

“Some of our unicorns will fly,” he added.

Returning to the subject of the Great Depression, Mr. Son asked investors to consider how that calamity had transformed the economic landscape, allowing new technologies to flourish.

“This shock from the corona outbreak will accelerate the paradigm shift toward a new era,” he said, adding that the Vision Fund’s investments were well positioned to take advantage of fundamental transformations in people’s lives, such as moving work and medicine online.

“We look forward to navigating the challenges,” he said.

Still, some of his unicorns had fallen farther than others, Mr. Son admitted. Of the 88 companies in the Vision Fund, 47 were losing money at the end of March, and the portfolio was worth about 1 percent less than the sum of money it had invested.

The humility was short-lived. As reporters peppered Mr. Son with questions about the first Vision Fund’s valuation, his characteristic fire returned.

Asked if he considered his investments a failure, Mr. Son pushed back: “I’d say it’s not too bad, considering the very poor market climate.”

The coronavirus crash was tough, he said, but he had seen worse. After the tech bubble burst in the late 1990s, he added, it was as though he were hanging from a cliff “with two fingers.” This time, he said, “compared to the past crisis, I’m just looking down at the bottom of the valley from above.”

But Mr. Son acknowledged there was still a long way to fall.

“Things will probably get worse,” he said, “but we will keep working hard to survive.”

Ben Dooley reported from Tokyo, and Erin Griffith from San Francisco. Kate Conger contributed reporting from Oakland, Calif.



Sahred From Source link Technology

Leave a Reply

Your email address will not be published. Required fields are marked *