Is Softbank biting off more than they can chew?
Softbank’s investment fund “Vision Fund” results are bound to be affected up to a US$ 5.4 billion (EUR 4.8 billion) mark by huge losses in their wide investment portfolio, especially from Uber and WeWork losses. Over the recent years, the Japanese mobile network operator has sparked a huge interest when it has invested in an extremely diversified set of industries. In 2013, Softbank acquired 80% of Sprint a major US operator, for US$ 21 billion (EUR 18.8 billion). The company also invested in robotics, considered an impetus for the future, with a controlling stake in 2012-2015 in Aldebarran Robotics and, in 2017, it acquired Boston Dynamics, a US-based leader in robot development, that received support from the DARPA (Defense Advanced Research Projects Agency).
Then, they acquired ARM Holdings, the UK-based multinational semiconductor and software design company in 2016 for US$ 31 billion (EUR 27.7 billion).
But the mobile network operator also invested in industries that are further away from its original industry such as WeWork (22%), a US-based shared-office space company. They also invested US$ 10 billion (EUR 9 billion) in Uber (20%), the US ridesharing company, along with Didi Chuxing (ca. 20%), its Chinese counterpart. And Softbank also owns significant shares of Alibaba (29.5%), Yahoo Japan (48.17%), and Indian mobile payment company Paytm (ca. 20%). Current Softbank holding are valued at over US$ 103 billion (EUR 92 billion), however, Oracle Chairman Larry Ellison said recently that he sees Uber and WeWork as “almost worthless” according to Barron’s.
Uber value has tumbled from US$ 82 billion (EUR 73.4 billion) at its IPO last May, to US$ 50 billion (EUR 44.7 billion). Uber shares have been affected by a California bill asking to requalify drivers as company employees and dropped when analysts said they doubted Uber would ever be able to turn a profit. WeWork had to postpone its IPO, leading to questioning the valuation of SoftBank share: analysts who valued WeWork at US$ 47 billion (EUR 42 billion) las January now consider it is only US$ 10 billion (EUR 9 billion) worth.
Masayoshi Son, Softbank emblematic CEO said “The results still have a long way to go and that makes me embarrassed and flustered. (…) There is just no excuse for entrepreneurs in Japan, myself included.”