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SoftBank CEO Masayoshi Son on WeWork Investment: 'Judgment Was Poor'

10 November 2019

After writing down the value of its holdings in WeWork and 20 other investments, SoftBank's $100 billion tech-focused Vision Fund posted a $9 billion operating loss in the third quarter of this year, its first quarterly loss since its 2016 founding.

Speaking in Tokyo on Wednesday, SoftBank Group founder and CEO Masayoshi Son mentioned he turned a blind eye toward the governance of WeWork.

Overall, the group posted an operating loss of 704 billion yen ($6.5 billion) in the July-September quarter compared to a 706 billion yen profit in the same period a year earlier and a 48 billion yen loss forecast by analysts.

WeWork will pause virtually all development for up to 4 many years, Son said, till the organization is in a position to have "steady functions and profitability".

SoftBank Investment Advisors - which manages the $100 billion Vision Fund I that counts Saudi Arabia and Abu Dhabi's sovereign wealth funds among its investors - cut the shared-workspace group's valuation by 74% even after accounting for parts of SoftBank's rescue deal, from $29.6 billion on June 30 to $7.8 billion on September 30.

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Son was also intent on making clear that SoftBank has a "no bailout" policy and there won't be any other rescues among the companies it invests in.

SoftBank slashed its pre-bailout valuation of WeWork by 83% in three months to $4.9 billion, according to an investor presentation dated for release on Friday.

"SoftBank's performance brings to mind Everett Dirksen's famous quote 'a billion here, a billion there, pretty soon you are talking real money, '" Pelham Smithers, whose London-based firm offers equity research on Asian technology companies, wrote in a note to clients. He began by flashing a slide of newspaper headlines and mocking reports that SoftBank or WeWork or both would end up going bankrupt.

Still, Son admitted that he overestimated the company's value and later discovered it had all kinds of corporate governance problems, including co-founder Adam Neumann's outsized power and control rights. The company also announced that its new executive chairman would be Marcelo Claure, the company's operating chief.

SoftBank has backed ByteDance Inc., the most valuable startup in the world at $75 billion, and the second-most valuable, China ride-hailing giant Didi Chuxing.

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"Including Uber and WeWork, there are now many unicorns which have done IPOs but are struggling to make profits and whose valuations are being questioned", he added. He said that his returns are about twice the average for venture capital.

Son pointed out that while Uber's share price has fallen recently, it has risen since SoftBank invested in it.

WeWork does seem to be executing on some of Son's plans. "The problem the fund has is that to get more investments IPO-ed, it will need a healthy USA stock market".

New Vision Fund to when once again concentration on artificial intelligence (AI). "There's no need for me to be so overcome with regret that I wither away", he acknowledged all the contrivance in which thru the match.

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SoftBank CEO Masayoshi Son on WeWork Investment: 'Judgment Was Poor'