5/15/2920
SoftBank’s Big Bets Are Hit Hard by Coronavirus
Coming earnings will show impact of steep declines in WeWork, Oyo and other top holdings
8:00 AM
wsj.com
SoftBank’s Vision Fund invested roughly half of its assets in just seven companies, most of which, it turned out, were in industries that were particularly hard hit by the coronavirus pandemic. Three are ride-hailing companies, and one is in the hotel business. Then there is the shared-office-space provider WeWork, which was already in trouble before the idea of open workspaces full of staff from multiple companies became a relic of the previrus era
SoftBank will report earnings Monday, and it has already told investors to expect a $17 billion write-down for the year ended March 31 because of poorly performing Vision Fund bets. The company’s shares fell 50% in a month earlier this year, and SoftBank has twice had extraordinary announcements of losses. In March, it said it would sell as much as $41 billion in assets to buy back stock and reduce debt, which helped its stock recover.
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The fund has had some winners, including cancer-detection company Guardant Health Inc., which is up more than seven times, but on a $300 million initial investment. The fund’s Uber investment was roughly 25 times bigger.
Of the fund’s biggest investments, the two least affected by the pandemic have gone on divergent paths. Coupang has benefited from a surge in online shopping during South Korea’s lockdown. The company had an operating loss of almost $600 million last year, though that was narrower than the more than $900 million it lost in 2018.
As soon as SoftBank bought semiconductor design firm Arm for $32 billion in 2016, sales growth stalled during a saturated smartphone market. The company had posted growth in smaller, cheaper chips for internet-connected devices but not enough to reignite overall growth, estimates IDC analyst Mario Morales. Now, slowing car sales are likely to hit a newer and more lucrative market for Arm chips, he said.
Arm was the company Vision Fund staffers were most pessimistic about in their estimates last summer. The fund holds one-quarter of SoftBank’s Arm shares, which they projected would fall in value by 25% over 10 years. |
