SoftBank plunges into the red following WeWork investment

SoftBank revealed the damage caused by its investment in troubled start-up WeWork on Wednesday, posting a quarterly loss of £5.0bn, its first for 14 years.

The Japanese investment firm reported a net loss of ¥700.2bn for the three months to 30 September, compared to net income of ¥526.4bn for the same period a year earlier. Analysts had been expecting a loss, but a far smaller one.

The tech companies backed by SoftBank’s venture capital funds, the massive $100.0bn Vision Fund and the smaller Delta Fund, have endured a terrible quarter.

SoftBank said that the fair values of investments including WeWork and Uber had decreased during the quarter. The two funds booked a combined quarterly loss of ¥970.0bn and SoftBank has been forced to make a number of writedowns.

Softbank has invested more than $10.0bn in WeWork, with the US property firm having been expecting until just recently to raise billions in a much-hyped initial public offering, but was rocked by corporate governance issues. The IPO was scrapped after investors questioned its valuation, thousands of employees lost their jobs and cofounder Adam Neumann was forced out, though he was reported to have secured a $1.7bn exit package.

The valuation of WeWork tumbled from an estimated $47.0bn at the start of 2019 to just $7.8bn by September.

Uber’s shares, meanwhile, have struggled since the taxi hailing app floated earlier in 2019.

At a press conference in Japan, Softbank’s billionaire founder and chief executive Masayoshi Son told reporters he had made “a bad investment decision” and that he was “deeply remorseful”. However, he insisted: “But there is no change to my strategy or vision.”

Son is understood to still be looking to launch a second Vision fund, despite the losses at the first.

Michael Hewson, chief market analyst at CMC Markets, said: “SoftBank declined to release a forecast for the current business year, raising uncomfortable questions as to what other nasties could be on the way.

“As things stand, the investments in Uber, Slack and WeWork are already underwater, with the prospect that things could well get worse when the Uber share lock up expires with the shares already at a record low.”