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SoftBank's damage from Uber, WeWork could exceed US$5b
[TOKYO] Masayoshi Son's startups have had a rough few months, from a botched initial public offering by WeWork to a sharp decline in shares of Uber Technologies Inc. Now analysts are beginning to calculate that the damage for Son's SoftBank Group Corp will likely reach into the billions of dollars.
Mitsubishi UFJ Morgan Stanley Securities Co cut its profit estimate for SoftBank's Vision Fund, its main investment vehicle, by 580 billion yen (S$7.45 billion) to an operating loss of 367.6 billion yen for the September quarter, citing declines in the stock prices of Uber and Slack Technologies Inc. and the withdrawn WeWork IPO. It also reduced SoftBank Group's fiscal year operating profit by the same amount to 1.01 trillion yen.
Mr Son is going through a particularly rocky stretch after repositioning SoftBank from a telecom operator into an investment conglomerate, with stakes in scores of startups around the world. He built a personal fortune of about US$14 billion with strategic bets on companies such as China e-commerce giant Alibaba Group Holding Ltd. But the recent troubles have weighed on SoftBank's shares, pushing them down about 30 per cent from their peak earlier this year as investors grow skittish about startup valuations.
"Profits in the [SoftBank Vision Fund] segment may still see considerable volatility ahead," Mitsubishi UFJ analyst Hideaki Tanaka wrote.
In an interview with the Nikkei Business magazine, Mr Son said he is unhappy with how far short his accomplishments to date have fallen of his goals.
"The results still have a long way to go and that makes me embarrassed and impatient," Mr Son said. "I used to envy the scale of the markets in the US and China, but now you see red-hot growth companies coming out of small markets like in Southeast Asia. There is just no excuse for entrepreneurs in Japan, myself included."
"It only just began and I feel there is tremendous potential there," Mr Son told Nikkei Business. The strategy is to invest in companies that share his vision of a world being reshaped by artificial intelligence, he said.
WeWork and Uber may be losing money now, but they will be substantially profitable in 10 years' time, Mr Son said in the interview. At a private retreat for portfolio companies late last month he had a different message: become profitable soon. At the gathering, held at the five-star Langham resort in Pasadena, California, Mr Son also stressed the importance of good governance. Just days later, SoftBank led the ouster of WeWork's controversial co-founder Adam Neumann.