SoftBank Vision Fund suffers $17.7 Billion loss as Alibaba’s Jack Ma steps down

SoftBank Vision Fund suffers $17.7 Billion loss as Alibaba’s Jack Ma steps down

Here’s what you need to know:

 

  • SoftBank Group booked a record 1.36 annual operating loss.
  • Loss from Uber was $5.2 billion, WeWork added $4.6 billion
  • SoftBank Vision Fund business lost 1.9 trillion yen ($17.7 billion) last fiscal year
  • SoftBank said that Jack Ma, co-founder of Alibaba, will step down after 13 years as a director.
  • 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
  • The losses are the worst ever in the company’s 39-year history.
  • Son’s fortunes dwindled in 2000 as SoftBank stock lost 93% by the end of that year. Son lost $70 billion

 

Will Coronavirus push Masayoshi Son over the cliff as SoftBank’s Stocks Dive?

SoftBank founder Masayoshi Son’s $100 billion Vision Fund went from a profiteering cash cow a year ago to its biggest nightmare on earnings.

Softbank took a huge bet on several start-ups which has seen it now struggling with the impact of the coronavirus on the portfolio of startups weighted heavily toward the sharing economy.

Uber’s disappointing public debut last May was followed by the implosion of WeWork in September and its subsequent rescue by SoftBank.

“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.”

How messy is it for Masayoshi Son?

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Bloomberg reports Uber is responsible for roughly $5.2 billion of the Softbank Vision Fund's losses over the last fiscal year, while WeWork totaled $4.6 billion and the rest of its portfolio made up $7.5 billion.

SoftBank's $100 billion Vision Fund, spearheaded by CEO Masayoshi Son, has wobbled from contingencies triggered by the pandemic. WeWork's valuation dipped 90% from its peak as its IPO was in the smokes while board members cry over spilled milk by defaulting on its agreement to bail out the troubled company with $3 billion of WeWork’s shares.

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Oyo Hotels & Homes and Uber Bites the Dust as billions are wiped out of companies coffers.

WeWork’s valuation has sunk to $2.9 billion, down more than 90% from its peak, a far cry from SoftBank’s investment of $10 Billion.

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.

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The SoftBank Vision Fund was launched in 2016 with a capital of $100 billion. SoftBank put in $25 billion of that, while $45 billion came from Saudi royals.

How did Masayoshi Son respond to a financial Tsunami said to be the worst ever in the company’s 39-year history?

Masayoshi Son made $10 billion a week during the height of the Dotcom Boom and saw his stocks dwindle in 2000 as 93% of SoftBank’s stock was lost. The Tech tycoon lost over $70 Billion in revenue. Instead of blowing steam, he invested $30 million in a little-known Chinese startup called Alibaba. SoftBank still has over a $100 billion stake in the company.

As the concerns about investments mounted, Son quickly bought back two shares. 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 plowed in 2 trillion-yen follow-up.

SoftBank has bought 250.6 billion yen of its 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.

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Who knew that A $30 million investment in a little-known Chinese startup called Alibaba after losing 90% in the Dot-Com Burst will mitigate the financial crisis caused by a pandemic 20 years later.

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.

The departure of Ma, who retired as Alibaba’s executive chairman in September, comes as he pulls back from formal business roles to focus on philanthropy.

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.

 Investors Desk

“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 a small win,” 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.”