Visionary investor Masayoshi Son is disclosing the damage that Uber and WeWork did to their ridiculously massive venture capital fund last quarter… and it’s not pretty.
The Japanese investment powerhouse on Wednesday reported its first quarterly operating loss in 14 years — about $6.5 billion –after writing down the value of a string of marquee investments. It swallowed a charge of 497.7 billion yen ($4.6 billion) for WeWork, whose spectacular implosion turned the once high-flying shared-office startup into a Silicon Valley punchline.
Bloomberg
Tesla had $5.5 billion in cash on hand at the end of Q3 2019. If Tesla spent every dollar they had in their bank account, they couldn’t rack up the kind of losses Softbank managed to pull off in a single quarter. And unlike Tesla, the Vision Fund didn’t actually make anything. They just went to town spending other peoples money on overvalued tech companies. Major investors include Saudi Arabia’s Public Investment Fund (contributing $45 billion) and the Canada Pension Plan Investment Board.
The losses call into question the billionaire founder Son’s deal-making approach just as he’s trying to raise an even larger successor to his $100 billion Vision Fund
Bloomberg
This guy is trying to raise more money for an even bigger fund?!?!
The investment vehicle had been a driver of profit growth at SoftBank, contributing over $14 billion in mostly paper gains over the past two years.
Bloomberg
Ah, profit growth driven by “paper gains”. Also known as “imaginary money”.
On Wednesday, SoftBank’s chairman took some blame for his poor decisions. “There was a problem with my own judgment, that’s something I have to reflect on,” said an unusually somber Son.
Bloomberg
Ya think?
But the entrepreneur then launched into a spirited defense of his track record. He began by throwing up on a giant screen several newspaper headlines, saying media reports had pegged SoftBank or WeWork — or both — as bound to go bankrupt.
Bloomberg
Fun quote to bookmark for later, in case either or both of them do go bankrupt
The operating loss was 704.4 billion yen in the three months ended Sept. 30, the Tokyo-based company said in a statement. That easily surpassed the 230.8 billion yen average of analysts’ projections, and compared with a 705.7 billion yen profit a year earlier. Its signature Vision Fund — the world’s single largest pool of startup investments — reported a 970.3 billion yen loss in the quarter.
Bloomberg
Always good when you can surpass analyst expectations, I guess
“Son’s handling of WeWork raises some fundamental questions about his investment strategy that need to be addressed,” Jefferies Group senior analyst Atul Goyal said ahead of the earnings release. “There will be more failed investments in the future, how does he plan to handle them?”
Bloomberg
In the case of WeWork, they just poured in billions more in cash. That should work, right? As long as they still have cash…
In summary, the Vision Fund is shit on a plate. Masayoshi Son was asked to prepare a beautiful, healthy, and nutritious dinner for his guests. Instead he took a shit and tried to dress it up with fancy plates and silverware, despite the fact that everyone is clearly starting to see it’s not the gourmet dinner they were promised.
It’s a shit on a plate.