Published: Fri, November 08, 2019
Markets | By Otis Pena

WeWork woes pushes SoftBank to £5bn loss

WeWork woes pushes SoftBank to £5bn loss

Publicly, Son has said little about WeWork's missteps, though he has said he is "embarrassed" in general by some of SoftBank's decisions.

WeWork wasn't responsible for all of that $8.9 billion loss, however-just most of it.

Although startups always carry a bit of risk, Softbank had so far been successful in avoiding a fiasco by carrying a widespread portfolio, despite having had its share of money-losing investments.

The company, run by billionaire investor Masayoshi Son, made an operating loss of 704bn yen (£5bn) in the three months to the end of September, in results published on Wednesday.

But the entrepreneur then launched into a spirited defense of his track record.

But the questionable corporate governance practices at WeWork have turned out to be a major crisis for Softbank.

Son pointed out that while Uber's share price has fallen recently, it has risen since SoftBank invested in it. "I regret them deeply".

Son has a record of prophetic investments in companies like Alibaba, often referred to as the Amazon.com of China, which recorded revenue previous year exceeding $56 billion.

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SoftBank's quarterly sales slipped 3% to 2.32 trillion yen ($21 billion) from 2.38 trillion yen the same period the previous year.

Many Vision Fund-financed startups are failing, leading analysts to question SoftBank's investment strategy of dumping money into companies banking on growth vs. profitability.

WeWork's parent, the We Company, was forced to abandon an initial public offering of its shares on U.S. stock markets at the end of September after investors queried the huge valuation given to the office space rental company. The company reported a gain in valuation for 25 companies, the same number that saw their worth decline.

SoftBank said Wednesday that it expects a special loss on the value of its shares of subsidiaries and associates of almost 498 billion yen ($4.6 billion) for its non-consolidated financial statement for the fiscal year ending in March 2020.

Last month, SoftBank announced a $9.5 billion bailout for WeWork, including $5 billion in new financing.

Oyo, India's No. 1 hotel chain, is sitting pretty after Vision Fund gave the company's founder money to buy back shares from early investors... and inflate its valuation. Despite the large stake, WeWork remains an associate rather than a subsidiary, which is good for SoftBank since it will not have to take on the startup's already sizable $22 billion in debt and $47 billion in leasing obligations.

On Monday, the Financial Times reported that the Japanese magnate had told his colleagues he had "created a monster" in WeWork, whose cofounder Adam Neumann stepped down as CEO in September before the company shelved its initial public offering indefinitely.

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