Japanese tech conglomerate SoftBank Group said it expects to lose $24 billion from investing in the co-working real estate company WeWork and satellite telecommunications company OneWeb, Techcrunch reported.
SoftBank and its founder, Masayoshi Son, raised funds and used billions of other people’s dollars — and their own — to invest in machine learning technology, robotics and next-generation telecommunications.
The coronavirus pandemic is accelerating erosion of SoftBank’s $100-billion Vision Fund and exposing its weaknesses, Mercedes Ruehl reported for Financial Times.
The startup-focused Vision Fund was thought to have one of the deepest capital pools in all of tech.
The $24 billion loss has probably wiped out the gains that the Vision Fund (which is backed by United Arab Emirates and Saudi Arabia) accumulated since its launch three years ago.
SoftBank founder and billionaire Masayoshi Son is better at raising money than investing it, Financial Times, reported.
Not all of SoftBank’s bets were bad. It’s making money off its Alibaba investment and “a relatively strong core business in telecommunications and semiconductor holdings,” Techcrunch reported. The Vision Fund also invested heavily in Twitter CEO Jack Dorsey’s Slack before it went public. Slack is doing well thanks to the work-from-work boom triggered by COVID-19.
WeWork’s valuation was cut from more than $40 billion to around $8 billion. SoftBank bailed out the co-working space giant, giving it up to 70 percent control of WeWork. Former CEO Adam Neumann’s stake dropped to low double digits.
“Brandless went bust earlier this year, and real estate investments in Compass along with investments in travel and tourism-related businesses like Oyo have suffered in the wake of the COVID-19 outbreak,” Techcrunch reported.
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“Son’s insistence that startups grow faster than their founders planned, and strong-arm them into taking more money than they might have wanted, has turned into a burden,” Bloomberg reported in an op-ed. “And that’s become a huge liability to investors in the Vision Fund and SoftBank, too.
“By throwing cash around, dozens of startups became addicted to spending instead of building fiscal discipline into their business models. For years, it seemed like a sound strategy. By having more money than rivals, SoftBank-backed companies could win market share by offering bigger incentives, taking out more ads and luring the best talent.
“Today, SoftBank has a major stake in sector leaders like Uber Technologies Inc., WeWork, Grab Holdings Inc. and Oyo. But climbing to number one doesn’t mean being profitable.”
