SoftBank Reveals $6.5 Billion Loss From Uber, WeWork Turmoil (bloomberg.com) 33
Masayoshi Son is finally disclosing the damage from SoftBank Group's bets on WeWork and Uber. From a report: The Japanese investment powerhouse on Wednesday reported its first quarterly operating loss in 14 years -- about $6.5 billion -- after writing down the value of a string of marquee investments. It swallowed a charge of 497.7 billion yen ($4.6 billion) for WeWork, whose spectacular implosion turned the once high-flying shared-office startup into a Silicon Valley punchline. The losses call into question the billionaire founder Son's deal-making approach just as he's trying to raise an even larger successor to his $100 billion Vision Fund. The investment vehicle had been a driver of profit growth at SoftBank, contributing over $14 billion in mostly paper gains over the past two years. Now, the shrinking valuation of Uber and WeWork, once among the brightest stars in the SoftBank constellation, raises the prospects of more writedowns in the Vision Fund's portfolio with its high exposure to businesses that prioritize growth over profitability.
My heart bleeds for them (Score:2)
but not really, I'm just kidding.
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SoftBank really the last number of years seems to have followed the "Well they sound cool in the press!" school of investments.
I feel like they were so stagnant and irrelevant that their board ordered them to get out there and invest in whoever looks exciting and immediately were taken by every huckster in silicon valley.
OneWeb: SpaceX Starlink
Boston Dynamics: Cool YouTube videos... but profit?
WeWork: Doomed
Uber: We'll see
DoorDash: Good Luck
They're deeply invested in a lot of dubious business models.
No problem (Score:2)
Saudis have an infinite supply of money. More coming soon with the Aramco $2 trillion IPO. $6.5 billion is pocket change.
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Technically the saudis are only floating 1-2%, but maybe it is enough to float SoftBank for another year or two...
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They can think whatever they want, as long as they don't think they're Team Dai-Gurren.
New accounting (Score:2)
My shocked face (Score:4, Insightful)
You mean just because a guy struck gold using a y-shaped stick once doesn't mean he can find gold every single time?
So much of the start-up/investor/VC culture we are in right now assumes that having a good idea once (or simply being lucky enough to be an early enough mover) translates into automatic continued success or indicates some type of expertise or genius far beyond what actually exists. How many of these people actually go on to have followup successes? Very few.
And this ignores the fact that so many of the companies they "invest" in have no real path to real "profitability". Their only way to profit it to keep growing and adding investors. They're nothing more than legal ponzi schemes. It seems more and more that investors aren't owners, they're customers. They are the ones that the true owners hope to profit from, not the users/traditional "customers". And they are being sold a bill of goods.
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I want to open with I completely agree with you're points there. However, a bit of devil's advocate, if VC dried up, the diamond in the rough would be that much more difficult to find. The fact that capital flows so easily to these people helps to drive potential innovation, even if in the end it sputters out. It's difficult to know which failures impart knowledge of "what not to do".
I still agree with you completely, but I think it is worthwhile to consider the ramifications of your statement, if taken
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I want to open with I completely agree with you're points there. However, a bit of devil's advocate, if VC dried up, the diamond in the rough would be that much more difficult to find. The fact that capital flows so easily to these people helps to drive potential innovation, even if in the end it sputters out. It's difficult to know which failures impart knowledge of "what not to do".
I still agree with you completely, but I think it is worthwhile to consider the ramifications of your statement, if taken to the extreme end here. Yes, there's a middle ground clearly and I'm pretty sure your statement is meant in the most logical conclusion. However, I've found that once investors get hooked on an idea, they have a tendency to run it to the most illogical end.
It comes down to two words: due diligence. With due diligence you wouldn't have had Theranos. Uber and WeWork would be shadows of themselves (if they would have even survived). MoviePass wouldn't have dragged on for as long as it did. It's all about the thinking of "this guy did it once, he'll do it again" or "I picked this huge winner, I'm a genius and everything I touch turns to gold" or a simple bandwagon effect playing on those 2 thoughts. It hurts the VCs, it hurts the retail investors who get in
Re:My shocked face (Score:4, Interesting)
I don't think it hurts everyone. It helps the people who get to use the subsidized services while they last. I have very little exposure to "the market" so if it goes down, it won't affect me much (with the big caveat that I keep my job, which didn't happen last downturn).
A lot of middle class folks like me enjoy cheap rides, cheap scooters, cheap food delivery, cheap entertainment streaming and so on at rates that aren't sustainable. Eventually these things will need to charge someone more in line with what they cost, and at that point I'll either stop using them or I'll decide it is worth it to me to pay more.
But for now, I'm benefiting from these VCs burning their cash.
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I don't think it hurts everyone. It helps the people who get to use the subsidized services while they last. I have very little exposure to "the market" so if it goes down, it won't affect me much (with the big caveat that I keep my job, which didn't happen last downturn).
Like you say, there's job loss. In the last big downturn housing prices got hit hard. Middle class workers, especially younger ones who didn't get pensions, risk seeing 401k retirement savings (which were designed to supplement, not replace, pensions) take big hits. All those cheap services you rely on go away, meaning your monthly expenses have gone up.
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I see this a lot "I am middle class but I don't have much market exposure"
One of these things is not true for Americans anyway. If you are middle class you have major market exposure you don't have choice because of the way the 401K system is operating right now. So this leaves us with either you not really middle class at all in that you have no savings no real freedom of movement because you can't actually afford to be unemployed for more than month or two (hint that makes you a serf not middle class) o
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I see this a lot "I am middle class but I don't have much market exposure"
One of these things is not true for Americans anyway. If you are middle class you have major market exposure you don't have choice because of the way the 401K system is operating right now. So this leaves us with either you not really middle class at all in that you have no savings no real freedom of movement because you can't actually afford to be unemployed for more than month or two (hint that makes you a serf not middle class) or you are in the market.
My wife and I have more savings than probably the average right now, but that still doesn't translate into being financially secure, especially since she's pregnant. We could weather a few months unemployed but our savings would be wiped out. I would say almost anyone that has what you are describing (also known as "fuck you" money) has already well established themselves in a career or has been earning a salary well on the higher end of middle class. As for me and many people my age getting out of colle
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I am not describing (fuck you money) not many people have that. I am describing, "I got laid but I don't have to sell the cars and cancel Christmas, it will be a set back but I can find another job money before financial ruin arrives" money.
Middle class has a specific meaning. Belonging to it does not make you a good person or a bad person its not a value judgement its a description. From what you wrote you are either there or getting there. You figure out where you actually fit now. Understanding where
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Most Americans have zero retirement savings (Score:2)
Being "in the market" doesn't make you middle class. You're putting cart before horse. You become middle class (or are born into it) and enter the market because you have a lot more money than you need to live off of.
That's what makes somebody middle class. It's having enough money to be financially secure.
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No I am not. Being financially secure means having savings. Having savings means investing today because at the rate real living expenses grow you could only have security for more than a short time if you have either an enormous amount of money or its in the market growing too.
Someone mentioned bonds...Yes you can do that. I still consider that investing in being in the market its just you are on the debt side. Okay the bond market not the stock market. Its still investing. My point was you can hold a
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The way it was supposed to work is the "smart money" provides a service to the retail investor by at least doing enough "due diligence" to ensure there are real products and real business to invest in. Increasing things like Theranos are happening because the egos in the smart money space are as large as ever but the "risks" are not. Central banks have got debt running so cheap there are no consequences for the big guys being wrong. After all when you can borrow for free if you make a bad bet well you bo
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It comes down to two words: due diligence.
The problem with VC investing is "due diligence" isn't always possible - If you have some new, disruptive technology it's often not particularly easy to do a market analysis. Analyzing Uber in 2009, when there was nothing else to compare it to - Other than highly regulated traditional taxi cabs & limo services - Would have been very difficult. Anticipating changes in regulatory environments also difficult...
Re:My shocked face (Score:4, Interesting)
It comes down to two words: due diligence.
The problem with VC investing is "due diligence" isn't always possible - If you have some new, disruptive technology it's often not particularly easy to do a market analysis. Analyzing Uber in 2009, when there was nothing else to compare it to - Other than highly regulated traditional taxi cabs & limo services - Would have been very difficult. Anticipating changes in regulatory environments also difficult...
Well, in the case of Uber it was pretty easy to see most of the roadblocks it would experience, such as operating against local laws in most markets, insurance/liability issues, minimum wage/hour laws, etc. The only surprising thing was how many people flocked to drive for them, which is more a product of how much underemployment there is in this country.
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What was difficult to calculate was the degree to which those roadblocks represented true impediments to Uber's business model. If they were truly roadblocks there would be no Uber most American cities. That's plainly not the case.
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> if VC dried up, the diamond in the rough would be that much more difficult to find
The diamonds will be just fine, thanks. The chaff, however, .....
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IPOs are dead. The real future is in privately held companies that, depending on what they do, scale down directly to local communities of investors.
But isn't really even a "good idea" ??? (Score:2)
Good money after bad (Score:2)
Hmm (Score:3)
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presumably raise prices after the monopoly has been established.
No, that was not Uber's plan.
Their plan was to grab a large chunk of the market while incurring losses and then transition their customers to self-driving cars which would be cheaper to operate.
The problem is that Uber is WAY behind on SDC tech. Waymo and Tesla are years ahead of them.
Uber has no plausible path to profitability.
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It gets used up...
1. Subsidizing rides to encourage use of the service (1999 eyeballs all over again)
2. Trying to purchase legislation enabling them to continue to operate as a network of contractors
3. (I'm sure) massive cloud computing charges
4. Hookers and blow for the executives
5. Free food, free beer, fancy office furniture and all the startup trappings for their employees
6. Never ending hiring spree (though that's had the brakes put on it by the IPO.)
Some stuff we got out of this Second Dotcom Bubble i
Uber is a pension grift (Score:2)
TL;DR, pension funds are investing in Uber and other high risk "unicorns". Pension funds move slow to invest and divest. Individual investors plan to run up the value of these companies, get pension funds in, then bail when they collapse, leaving the pension funds holding the bag.
Finally when the pension funds collapse the tax payer moves in to guarantee the pension fund because the alternative is thousands of old people (who vote, let's not forget) either out on the streets or moving in wit