Masayoshi Son Admits Judgment Errors. Is It the Start of the End?
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Not all seems to be well with Japanese investor and founder of SoftBank, Masayoshi Son. On the back of $6.5 billion loss the telecom conglomerate made in the quarter ending September 2019 mostly due to operating loss from its $100 billion Vision Fund, the billionaire known for his maverick statements for the first time, probably, admitted of errors in his investment style.
“My judgment around WeWork was not right in many ways,” he said on Wednesday after announcing company result. Son, known for making decisions that mostly hit the bull’s eye, though confessed but remained defiant. He admitted to lapse in judgment and also added that he overestimated WeWork’s co-founder Adam Neumann. “I turned blinded eye especially to governance.”
According to a report by Financial Times, Son reportedly told his colleagues “we created a monster” in WeWork.
Apart from WeWork, which reduced its valuation to $10 billion from a $47 billion before going public and eventually scrapped the plan, SoftBank’s bet on Uber too has not been doing well as the shares of the ride-hailing company is trading much below its issue price.
WeWork, the US-based company offering co-working space, got a $5-billion infusion from Son-led SoftBank, a move many see a as rescue effort to save the company which almost ran into the ground. In addition, SoftBank will also pay $3 billion to existing shareholders and will also honor its commitment of $1.5 billion due to come in this year.
Amounting Losses & Too Much faith Backfiring
Everything was hunky-dory for SoftBank until things started spiraling down for WeWork and even cab aggregator Uber.
Media reports have suggested that Son and Neumann shared a close comradeship. It was even reported that Neumann flew down to Tokyo a week before the scheduled IPO to meet Son and seek help.
To put things together for WeWork, SoftBank came up with the rescue package which gave the conglomerate 80 per cent stake in the company, a move that would ensure that the Silicon Valley’s iconic company survives and doesn’t fall apart.
A lot of portfolio companies of SoftBank are waiting in the wings to go public. However, taking lessons from the existing examples, Son has told these companies that they have to become profitable first before planning IPOs and that these companies should not expect rescue package as in the case of WeWork. Son apparently has digressed from his capital-infusing strategy to making companies profitable first.
The failure of WeWork and Uber have had a domino effect on Softbank’s once-upon-a-time stellar reputation. Saudi Arabia, which is one of the biggest backers of SoftBank’s Vision Fund 1, is uncertain about how much investments it should make in Vision Fund II after the crisis hit its portfolio companies.
Bloomberg reported a panel which included Son in Saudi Arabia’s Future Investment Initiative conference recently saw few people in attendance, possibly demonstrating a lack of confidence in Son.