SoftBank Facing Record Losses As Startup Investments Fail To Deliver

SoftBank Group Corp. SFTBY is forecasting record losses for the financial year that ended March 2020, as its Vision Fund and other investments flounder.

What Happened

The Japanese conglomerate is projecting its first operating loss in 15 years. SoftBank’s $100 billion Vision Fund is expected to clock a loss of 1.8 trillion yen ($16.5 billion) as its startup bets fail to deliver, putting the entire group’s earnings under pressure. 

In a statement, the group said the losses in the Vision Fund arose because of “a decrease in the fair value of investments due to the deteriorating market environment.”

SoftBank’s projected annual net loss stands at 750 billion yen ($7 billion).

Why It Matters

The Vision Fund has recorded its third consecutive quarterly loss as bets like the co-working space company WeWork and cab aggregator Uber Technologies Inc. UBER had to be written off. 

SoftBank’s own investments outside of the Vision Fund have taken an 800 billion yen ($7.4 billion) hit, according to the company’s earnings forecast. 

CEO Masayoshi Son’s personal guarantee of $2 billion, given to OYO Hotels & Homes founder Ritesh Agarwal to buy back shares in OYO, is also under the scanner. SoftBank had vowed to refrain from bailing out struggling startups.

WeWork sued SoftBank after it refused to purchase WeWork’s shares, citing non-compliance with terms of the agreement between the two companies.

The group's dismal investment record has attracted activist investor interest, with Elliot Management Corp. taking a substantial stake in the Group and forcing SoftBank to initiate share buybacks to the tune of $41 billion last month.

Price Action

SoftBank’s OTC stock fell 3.97% to $18.63 on Monday. The company’s shares traded 2.19% higher at $39.90 at press time in Tokyo.