Jeffries slaps SoftBank with hold
SoftBank Group Corp earned only its second Hold rating yesterday after a Jefferies analyst downgraded the Japanese conglomerate for engineering WeWork’s $9.5 billion rescue package. Analysts covering SoftBank Group Corp. have been nearly unanimous in recommending investors to buy shares in Masayoshi Son’s company. That’s even as it faced billions of dollars in writedowns from a botched initial public offering by WeWork and a sharp decline in shares of Uber Technologies.
Now Son’s decision to double down on WeWork with a $9.5 billion infusion has prompted a rare voice of dissent to emerge.
Yesterday Jefferies Group cut its rating on the company to hold from buy, a recommendation it held since at least 2014, citing increased risk of SoftBank “throwing good money after bad.” The brokerage also reduced its 12-month price target 19% to ¥4,530 ($41.71). Of the 19 analysts tracking the company, 17 have buy ratings. Jefferies joins HSBC Holdings in recommending that investors hold for now.
Once some of the brightest stars in the SoftBank constellation, Uber and WeWork now number among its worst performers. SoftBank is planning to take a writedown to its Vision Fund of at least $5 billion to reflect a plunge in their value, according to people with knowledge of the matter. Son is likely to address the subject when the Japanese conglomerate reports results on Nov 6. SoftBank’s shares slid 1.2% yesterday — their lowest since January and marking a fourth straight day of losses.
“Turns out we were naive to believe that zero is the floor” for WeWork’s worst case scenario, Atul Goyal, an analyst at Jefferies, wrote in a report. “In hindsight, those assumptions were misplaced as the risks have increased.”