SoftBank's Troubles Deepen With Warning of $16.7 Billion Writedown

An anonymous reader quotes a report from The New York Times: SoftBank warned investors on Monday that the value of its technology fund may have dropped by as much as $16.7 billion over the last fiscal year (Warning: source may be paywalled; alternative source), as its investments have been hit hard by the fallout from the coronavirus and by big bets on unprofitable companies like WeWork. SoftBank, which had deployed a $100 billion Vision Fund to make huge wagers on young companies like WeWork and Uber over the last few years, said in a statement (PDF) posted to its website that the fund would record a loss of 1.8 trillion yen for the fiscal year that ended in March "due to the deteriorating market environment."

While the loss will be partially offset by revenue from SoftBank's other businesses, the company said it expected to end the year with a 1.35 trillion yen loss, its first annual loss in 15 years. The disclosure marked another stumble for SoftBank, which upended the start-up investment world when it began the Vision Fund in 2017 but has lately been struggling. The fund was the largest pool of money ever raised for private technology companies, with backing from sovereign wealth funds in Saudi Arabia and Abu Dhabi, as well as Apple and Foxconn.

I'm sorry, but ...

[BAReFO0t]

... if you fall for something as obviously insanely stupid as WeWork was from the very start,
you deserve to fail with it.

And if you disagree, I've got an Eiffel tower to sell to you [smithsonianmag.com]. :)

Re:

[hey!]

Like most investors they have a portfolio with segments for different risk/reward categories. Softbank's investments run from fairly safe, like Alibaba, to highly speculative, like WeWork.

This is not like a pension fund; it's a machine built to trap black swans. Remember a lot of people here were pretty derisive of people invested in Amazon twenty years ago.

Re:I'm sorry, but ...

[UnknowingFool]

There's no argument against diversifying or taking risks on an investment; however, the amount of money they kept putting into WeWork is what their investors should be upset about. Lose $100M on several investments when the fund is several billion, that't not much. But they lost $6.5B on one investment.

Re:

[Nidi62]

There's no argument against diversifying or taking risks on an investment; however, the amount of money they kept putting into WeWork is what their investors should be upset about. Lose $100M on several investments when the fund is several billion, that't not much. But they lost $6.5B on one investment.

The issue is, Son happened to hit the jackpot on Alibaba and was in early on Yahoo so thinks he is now an investment genius. Of course, according to his wikipedia page he also has lost the most money of any person ($70 billion) during the dot com crash. Remember, past performance is not an indicator of future results.

Re:

[hey!]

There's always been people like this, who make and lose fortunes and then make them again. You'd think you'd only get one shot at it but apparently that's not how it works.

Re: I'm sorry, but ...

[klipclop]

Their investment strategy was to dump so much money into the startups so that it would inflate their market value when they IPO. Then they would cash out with a huge profit while retail investors are stuck with the deflating stock prices as the company fails. Fortunately things fell apart before they could IPO another piece of junk.

Re:

[pete6677]

That was definitely the intended strategy for WeWork. Hype it up and IPO, leaving the IPO buyers to be the greater fools holding the bag when it inevitably collapsed. But much to their surprise, Wall Street caught onto what a turd WeWork was pre-IPO, leaving SoftBank stuck holding their own bag of shit. Womp womp.

Re: I'm sorry, but ...

[BAReFO0t]

So... factually criminal behavior.

Reminds me of Ponzi schemes.

Somebody needs to go to prison over this.

Re:

[account_deleted]

Comment removed based on user account deletion

Re: I'm sorry, but ...

[BAReFO0t]

Burt WeWork isn't speculative. Speculative still implies some degree of legitimacy. Of possibility. Some part of "it could work".

WeWork is so blatantly obviously bullshit, it stands far on the other side of that line, way over there, *behind* even the man who sold the Eiffel tower *twice*. :)

That was my point.

bubble goes pop?

[esperto]

Could this be the first sign of the actual bubble popping? Will finally companies with no path to actually being lucrative be let to die?

Re:

[DontBeAMoran]

I don't know, but here in Canada, right now during this COVID-19 pandemic with the government needing all the money it can spare to help people during this country-wide shutdown, they're about to bail out the fucking oil industry. Are we supposed to believe those polluting scumbags didn't make any profits in the last decades?

Re:

[cusco]

Building up cash reserves is so 20th Century, if they don't pay out dividends every single quarter what will happen to the value of the executives stock options? It's not like the E-suites are going to be occupied by the same people five years from now, so why should they worry today?

Re:

[skaralic]

I don't know, but here in Canada, right now during this COVID-19 pandemic with the government needing all the money it can spare to help people during this country-wide shutdown, they're about to bail out the fucking oil industry. Are we supposed to believe those polluting scumbags didn't make any profits in the last decades?

Oil and gas is literally keeping you alive but please, do continue with your angsty schoolgirl rant...

Re:

[DontBeAMoran]

Is it really? The only thing I need is fuel for a vehicle I only take once a week, and since the voluntary lock-down it's more like twice a month.
All my other services use electricity, which is provided by hydroelectricity.

Re:

[skaralic]

Is it really? The only thing I need is fuel for a vehicle I only take once a week, and since the voluntary lock-down it's more like twice a month. All my other services use electricity, which is provided by hydroelectricity.

Surely you have a hot water heater or furnace keeping you warm. To say nothing about all your food arriving to the local store by trucks using diesel or the fact that farmers use a ton of oil products in the production of food. Even medical supplies use tons of oil byproducts for their plastics etc.

Re:

[DontBeAMoran]

Surely you have a hot water heater or furnace keeping you warm.

No I don't. As I mentioned in my earlier post, all my utilities run on electricity. As for the rest, electric vehicles will replace the ICE ones and we can make plastic out of plants.

Re:

[msc.buff]

Fed money printer says...brrrrrrr. Translation: No.

unpossible!

[LatencyKills]

I find it more remarkable that with such terrible judgement in the quality of startup ideas, they ever managed to make money at all. And just wait until Uber curls up and dies. How were they supposed to know you couldn't sell cab rides for less than they cost and not make money on volume? Who could have foreseen THIS?

Re:unpossible!

[DontBeAMoran]

A farmer needs to build a retaining wall on his farm, so he drives his truck and trailer into town to buy some bricks.

"I need to buy some bricks to build a retaining wall. How much are they?"

"Well, sir, that's going to depend on how big the wall is, vis-a-vis, length, height, thickness, etc... Bricks are 50 cents each, so I can sell you 1,000 bricks for $500."

"I'm not rightly sure how many I need, actually."

"I can make you a deal. For every 1000 bricks over 1,000 you buy, I'll discount *every* brick by 10 cents. So if you buy 2,000 bricks, it'll only cost you $800 instead of $1,000."

"Sounds like a good deal to me."

"So how many bricks would you like?"

"Why don't y'all just keep loadin' 'em until they're free."

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[account_deleted]

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Re:

[phantomfive]

a company that is fundamentally just a REIT + property management firm at its core

There are a ton of startups like that right now. Most of them have some side gimmick like "rent your apartment to own" or "making the mortgage process more efficient," and some of those are good ideas, but in the end the fundamental part of the business is just real estate.

Re:

[account_deleted]

Comment removed based on user account deletion

Re:

[cusco]

But management is who is approving the political contributions! What are you thinking? /s

Re:

[shanen]

Only branch that seemed to consider the relationship of politics? I actually gave Son some credit for playing Trump so smoothly. I doubt he even bothered with any donations. The smooches were much cheaper. Son has shown he is quite adept at dealing with politicians of every stripe. For another example, take China. (Don't you wish someone could?)

Pretty sure another aspect of this story is a splashy new building where Son's brother is cultivating startups. I visited a number of times during the construction,

Re:

[cusco]

The only thing that concerns me about Softbank is Boston Robotics. WeWork and Uber can go the way of Napster and AOL as far as I'm concerned, but Boston Robotics is doing some of the most incredible stuff in the field.

Re:

[phantomfive]

If this feels like the Indymac and AIG failures all over again, but in slow motion,

It doesn't feel like that.

in an attempt to blunt or avoid capitalisms natural 10 year cycle of boom and bust since it introduced credit as a stop gap during the 1973 market crash.

This recession has nothing to do with the business cycle.

Re:

[istartedi]

Markets were over-valued last year. Covid was just the pin the pricked it, but now we've got fresh Fed action *and* fiscal stimulus, so party on.

Re: Starting to feel like 2008 all over agin.

[phantomfive]

That sounds like a wishful analysis, something you wish were true, rather than a deep attempt to understand what was going on. First and foremost, the market isn't the economy, and it isn't the business cycle.

Re:

[DCFusor]

Yep, you're right. I wonder how many will understand this - or the broader implications and indications for what's next. Facts are so rare here...

All based on one "win"

[LynnwoodRooster]

Softbank has, basically, one big win in its history: the bet on Alibaba. Outside of that, some have been barely positive; most are losers. This is the case of investors blinded by Masayoshi's singular hit, and ignoring all his misses. Yeah, they made $60 billion on the Alibaba hit, but will probably lose the $100 billion in the Softbank fund, for a net loss of $40 billion.