How the Failure of WeWork and Uber has Forced SoftBank Backers to Rethink Their Strategies; Reports
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Uber’s disappointing run at the public stock market and WeWork’s dwindling financial situation has their star investor, SoftBank under the lense lens. The Japanese conglomerate run by Masayoshi Son, which one is considered as one of the most powerful investor bodies in the world has to now face questions and much worse, as its backers are rethinking their investment strategies in SoftBank, according to a report by Bloomberg.
Who are Softbank’s Backers?
SoftBank is primarily backed by the Arabs. Saudi Arabia has contributed nearly half of the capital for Son’s $100 billion Vision Fund. The Public Investment Fund committed $45 billion, $15 billion was invested by Abu Dhabi’s Mubadala Investment Co.
While PIF or the Public Investment Fund has decided to only invest the profits from Vision Fund into Vision Fund II, Mubadala is planning to lower its stake in the second vision fund to $10 billion from the current $15 billion.
What Triggered This?
When SoftBank’s investment came into the limelight, it toppled the investment ecosystem of the world. Until SoftBank’s advent, start-ups were not used to getting fat cheques. With several investments in iconic companies like Uber, Didi Chuxing, Grab, Ola, Paytm, Alibaba, SoftBank earned the sterling reputation of being ‘the’ investor. With Son’s cheques pouring into the start-up ecosystem, valuations seemed to go high. When things were going well, SoftBank’s glory was unprecedented and awe-inspiring. And today, it has become the bone of contention with its prime investments in companies like Uber and WeWork spiraling into an abyss.
Cab aggregator Uber, in whom, SoftBank invested $9 billion, becoming the largest shareholder in the company (which received $9 billion from SoftBank making the investment firm SoftBank the largest shareholder in the company) has been trading more than 30 per cent below its IPO prices. Adam Neumann’s co-working giant WeWork, has been in the news for its plans to go public but nevertheless, not without some stumbling blocks. There were also reports of Neumann flying to Tokyo to meet Son to resolve issues of raising capital that would delay the process of listing its shares in public.
This is a temporary lean phase for SoftBank. With the likes of Microsoft, Apple already committing themselves to Vision Fund II, the future of SoftBank’s both vision funds seems secure.