SoftBank boss takes blame for £5bn loss after WeWork punt
The billionaire boss of SoftBank Group has admitted to poor judgment in trusting former WeWork chief executive Adam Neumann, after the plunging valuation of the office space company pushed the Japanese tech investor to a 704bn yen (£5bn) quarterly loss.
SoftBank’s first quarterly loss in 14 years comes after a dreadful quarter for the tech companies backed by Masayoshi Son’s Vision Fund, a $100bn (£77bn) investment vehicle backed by Saudi sovereign wealth.
SoftBank’s operating loss was because of the “decrease in the fair values of investments including Uber and WeWork” held by its Vision Fund, it said.
“My investment judgment was poor in many ways,” said Son. “I am reflecting deeply on that.”
Son revealed he had been admonished by SoftBank board members over its $10.3bn investment in WeWork, and admitted his faith in Neumann was misplaced, in a presentation to investors on Wednesday.
He said: “I overestimated Neumann’s good side. I turned a blind eye to [his] bad side on things like corporate governance. I have learned a harsh lesson.”
Neumann was forced out of WeWork in October, after the company – which takes long leases on buildings, invests in trendy decor and then rents out to tenants on short-term agreements – was forced to abandon its plan to float on Wall Street at the end of September.
Potential investors had queried the $47bn valuation given to the nineyear-old business, and raised corporate governance concerns about Neumann and his control of the company. The valuation was more than halved before it was completely abandoned. SoftBank then led a $9.5bn rescue bailout of WeWork and Neumann received an exit package worth $1.7bn.
The company is now restructuring and up to 4,000 jobs are expected to go. The company started to tell staff in its EMEA region – Europe, Middle East and
Africa – about proposed job losses on Wednesday. Up to 1,000 are expected to be made redundant in the region.
WeWork said it was “in conversation” with staff “as we make changes to our operating model and workforce in light of our refocused strategy”. It said it was “committed to treating our colleagues fairly and with respect”.
Son said he was hoping for a “hockey stick” recovery in profits, referring to a rapid rise after a period of stagnation. He insisted that WeWork was not a “sinking boat”, but needed to cut spending.
Shares in Uber, which listed in May and is also a Son investment, fell to a new record low on Tuesday as it posted yet another loss. Some investors in its stock market float are now able to sell their shares for the first time, as a lockup period has expired.
Son’s personal net worth has plunged by about $6bn since July, when it peaked at about $20bn, according to the Bloomberg Billionaires Index, which tracks billionaires’ wealth.
The difficult quarter could complicate Son’s efforts to raise a second Vision Fund if investors question his high-risk strategy of making big bets on high-spending, young companies, in the hope that they can expand rapidly and dominate their sectors.
Many of the first Vision Fund’s investments are advanced technology companies such as games development platform Improbable and healthcare companies such as gene-sequencing 10x Genomics, but it also includes massive bets on more surprising sectors, such as storage company Clutter and a $300m investment in Wag, which provides dog-walking services.