SoftBank Vision Fund: Use the crisis to grow wings!
Japanese giant SoftBank’s Vision Fund has consistently invested in tech innovation and mobility since its creation. The Fund disposes of roughly $100 billion, coming not only from Softbank, but a variety of interested partners, and was one of Softbank’s main profit generators in the previous fiscal exercise.
This time around, the results were less encouraging. The consolidated portfolio of the investment fund lost $17.7 billion of value, landing at a total of $69.6 billion for an initial investment of $75 billion.
Roughly 2 third of the losses came from Uber ($5.2 billion) and WeWork ($4.6 billion). Uber’s results were disappointing, and so was its public debut in May 2019. When WeWork imploded shortly after, the Fund had to rescue the flex office space provider and installed one of its top guys at the head of the company.
Most of the Vision Fund’s investments target startups in the sharing economy. Typically, these companies focus on volume first and profitability afterwards – a good strategy when the global economy is in growth mode. No need to repeat that the Fund’s entire investment portfolio has lost value today.
In order to restore confidence, SoftBank has announced a total of 2.5 trillion yen ($23 billion) to be allocated to a repurchase scheme of its own shares. The company will also sell assets and shares in other companies to reduce its debt ratio and reinvest in itself. It is likely that SoftBank will be selling its stakes in Alibaba Group and some telecom participations.
Revamping the Board
The Fund will most probably become more conservative in the future as well. Its founder, Masayoshi Son, was criticized for his risky investments over the last few years, leading to the departure of some of the Board Directors. In the new constellation of the Fund, more independent directors will be appointed, replacing people such as Jack Ma, who has a mixed interest in the strategy of the SoftBank Vision Fund.
Son however remains positive about the future of SoftBank’s fund. He believes in market restoration and sees new opportunities: “Our unicorns have fallen into this sudden coronavirus ravine. But some of them will use this crisis to grow wings.”
It is clear however that the mobility industry, in which SoftBank has heavily invested, will need to focus on making money – and quick. A scary future for the many players in the industry, but a necessary step towards maturity of the business.
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