SoftBank Group reports record losses as Ma quits board
Struggling Japanese conglomerate SoftBank Group on Monday reported record losses, as the coronavirus pandemic compounded woes due to its investment in troubled office-sharing start-up WeWork.
The losses were announced shortly after the firm said Chinese tycoon and Alibaba co-founder Jack Ma would resign as a director of the board the following month.
The telecoms and investment giant had already sounded the alarm, warning last month that the "deteriorating market environment" would hit its important thing.
However the results were slightly worse than it had forecast, with net losses for the entire year that ended in March coming in at 961.6 billion yen ($8.9 billion), rather than the estimated $8.4 billion.
Operating losses for the entire year were 1.36 trillion yen, having forecast 1.35 trillion last month.
The conglomerate headed by flamboyant chief Masayoshi Son said it had been "adversely affected" by the global health crisis.
And it warned that "if the pandemic continues, the business expects that uncertainty in its investment businesses will remain over the next fiscal year".
Its investment funds, like the key Vision Fund, recorded operating losses of just one 1.9 trillion yen, and the company said it was dealing with businesses in the Vision Fund portfolio to get ready them for a "further deterioration running a business conditions".
The results are the most recent blow to Son, who has transformed what commenced as a telecoms company into an investment and tech behemoth with stakes in some of Silicon Valley's hottest start-ups through its $100-billion Vision Fund.
He has faced increasing criticism over his determination to pour money into start-ups that some analysts say are overvalued and lack clear profit models.
His biggest headache has result from WeWork, once hailed as a dazzling unicorn valued at $47 billion.
Son stood by his investment, even upping his stake, despite mounting questions about WeWork's strategy.
- 'Poor' investment decisions -
But things began to unravel this past year as WeWork haemorrhaged cash and cancelled its share offering, with founder Adam Neumann pushed out.
SoftBank Group and its Vision Fund have previously committed a lot more than $14.25 billion to the start-up, but in April japan firm scrapped a plan to get up to $3 billion WeWork shares as part of a restructuring programme.
WeWork is now suing SoftBank over your choice, alleging breach of contract.
The debacle has weighed heavily on the firm, which has struggled to raise funds for a much-mooted second $100-billion Vision Fund.
Investors are increasingly questioning if the supposedly cutting-edge businesses targeted by SoftBank are actually offering something new, said Masahiko Ishino, an analyst at Tokai Tokyo Research Institute.
"Before, they said these were buying cutting-edge technologies like AI, but what they did is normally old-fashioned, like property investments and hotels," he said, discussing WeWork and struggling hotel start-up OYO.
"Suppose you have 10 billion yen and 20 percent of it's been burned in somebody else's hands. Do you want to chip in more money there?" he said of the battle to attract investors to the next Vision Fund.
But Son said he was confident the tech-driven organizations among its Vision Fund portfolio will be well positioned to weather the coronavirus pandemic.
"Those technologies will lead the rebound," he told journalists.
"Our unicorns are facing serious challenges against the background of the coronavirus outbreak but I assume that many of them will fly over the valley of coronavirus and fly high."
In March, with stock markets plunging as the scale of the coronavirus pandemic became clear, the firm announced an idea to market up to $41 billion in assets to finance a stock buy-back, reduce debts and increase cash reserves.
Earlier Monday, SoftBank unveiled changes to its board like the resignation of Ma. No reason was presented with for his departure, after 13 years in the role.
SoftBank's 2000 investment in Alibaba was an integral driver of its transformation, with its initial $20 billion stake eventually being worth around $50 billion.
