SoftBank’s Son is sorry. Kind of
One big payday to start: Bankers, lawyers and other advisers are set to take home a combined £281m for their work on the London Stock Exchange Group’s $27bn takeover of financial data provider Refinitiv, in a huge payday for some of the city’s top dealmakers. More here.
Now on to the main item . . .
Adam Neumann may have failed in his attempt to “elevate the world’s consciousness”, but he has succeeded in opening Masayoshi Son’s eyes to the perils of bankrolling talented salesmen.
At least until another revolutionary comes calling.
The defiant founder of SoftBank has admitted that he turned a “blind eye” to problems with Neumann, the founder and former chief executive of the lossmaking property start-up WeWork.
Son was forced to eat humble pie on Wednesday after disclosing a $4.6bn writedown on the Japanese company’s investment in WeWork. You can see the full results in this piece by the FT’s Kana Inagaki, but suffice to say, it was SoftBank’s first operating loss in 14 years.
We’ll spare you another rerun of the WeWork debacle. All we need to say here is that in January SoftBank invested in WeWork at a $47bn valuation and by October it was forced to inject billions of dollars to save it from going under, and pay Neumann $185m for the pleasure.
Son cannot write that off as just a “bad investment decision”.
The WeWork fallout is particularly embarrassing for Son because of his blind faith in Neumann’s abilities. Lest we forget, it took 12 minutes for the Japanese investor to hand over $4.4bn to the WeWork founder and Son encouraged the haemorrhaging of capital to fuel fast growth, which, as we know, Neumann really took to heart.
Neither is WeWork an anomaly. There are other SoftBank-backed companies that have fallen short in public markets. Uber contributed to the investment group’s third-quarter losses and that is without factoring in its recent stock rout as its lock-up period expired. Then, dog-walking start-up Wag is reportedly trying to sell itself for a price well below SoftBank’s valuation and there are some serious questions around the fast-growing Indian hotel company Oyo.
Remember, this was supposed to be the year that Son’s bets came good.
All of this is unfolding as Son tries to raise a second investment fund, most of which is supposed to come from existing investors. He has the tough job of convincing them that this is just a blip on his record rather than a pattern.
Who will the second Vision Fund’s investor see? The man who invested $20m in Jack Ma and turned it into over $100bn or the man who ploughed billions into Neumann, a charismatic wannabe trillionaire who wants to live forever.
The FT’s Lex has a good take on the complexity of SoftBank’s accounts, which we explained in a big read earlier this week. If you haven’t already, check it out here.