SoftBank Takes Another Multibillion-Dollar Hit From Bad Bets – The New York Times

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SoftBank Takes Another Multibillion-Dollar Hit From Bad Bets – The New York Times
DealBook|SoftBank Takes Another Multibillion-Dollar Hit From Bad Bets

A $2 billion plunge in profitability will increase pressure on the Japanese conglomerate to get its financial house in order.

Credit…Kim Kyung Hoon/Reuters

TOKYO — SoftBank Group has taken another multibillion-dollar hit from its ambitious but costly bets on once high-flying companies like Uber and WeWork, putting growing pressure on the Japanese conglomerate to get its financial house in order.

The company and its founder and chief, Masayoshi Son, have dominated the world of technology investment through the $100 billion Vision Fund. More recently, the company has become a target for the hedge-fund giant Elliott Management, which has been urging changes at the Japanese firm, including governance overhauls and stock buybacks.

On Wednesday, SoftBank may have given Elliott another reason to complain. It said the Vision Fund and other investments cost its bottom line 225.1 billion yen, or about $2 billion, in the final three months of 2019.

Overall, SoftBank reported a profit of about $501 million for the quarter, well short of what investors had expected. Its profit was less than one-tenth of what it had posted one year earlier. Its operating profit fell 99 percent.

In a presentation to investors and analysts on Wednesday, Mr. Son suggested that he would slow the Vision Fund’s torrential pace of fund-raising and investing.

Asked about the status of raising money for a planned $108 billion second iteration of the Vision Fund, Mr. Son said that SoftBank’s recent challenges had “caused concerns among potential investors,” adding that he had “received a lot of feedback from people, and we are actively engaging in discussions.”

Mr. Son said that SoftBank would continue making new investments. “Once potential partners are more comfortable,” he added, “they will join us.”

Despite the huge losses, Mr. Son did not appear chastened. Instead, he played down concerns about SoftBank’s future, dismissing worries about its enormous corporate debts and its underperforming investments in a number of quixotic tech firms.

Focusing on the positive, he cited SoftBank’s victory in the United States this week related to Sprint, the American wireless carrier that the company has spent heavily to support. On Tuesday, a judge approved a merger between Sprint and T-Mobile, another American wireless carrier, to form a more powerful competitor to rivals like AT&T and Verizon.

The deal is one of the few bright spots in what has been a tough year for SoftBank. Last February, the company was riding high. WeWork and Uber, two companies in which it had invested heavily, planned to sell shares to the public, raising hopes of high valuations and big returns.

Since then, SoftBank has weathered a number of setbacks. The most spectacular was the cancellation of WeWork’s initial public offering after the revelation of serious governance issues, including allegations of self-dealing by the company’s chief executive at the time. In November, SoftBank said it had lost $4.6 billion on its investment in WeWork.

Additional stumbles have compounded the losses. Uber’s I.P.O. was disappointing. Other investments have also soured; its stake in the dog-walking start-up Wag was sold at a loss.

Mr. Son has often urged investors to ignore short-term fluctuations in the values of the company’s investments, saying that he is making long-term bets that he believes will fundamentally change major industries like transportation and real estate.

During his presentation Wednesday, Mr. Son showed a slide that from one angle appeared to be a duck, but seen from a different one looked like a rabbit. The picture, he said, was a metaphor for how some analysts were taking the wrong perspective on the company.

“The market view is still skeptical of us, that SoftBank might go bankrupt,” he said. “But that tide is turning.”

At another point, he asked members of the audience to raise their hands if they knew how much Uber’s share price had increased since SoftBank’s investment, and then scolded them when only a few responded.

Mr. Son is used to being the one who makes big investments in companies and then calls the shots. But as the company’s troubles pile up, that dynamic may be shifting.

Elliott Management, the $40.2 billion hedge fund run by Paul E. Singer, emerged last week as a major SoftBank investor after buying a $2.5 billion stake. Elliott is looking at ways to lift SoftBank’s shares through moves like stock buybacks, changes to SoftBank’s board or increased transparency for the Vision Fund.

Addressing questions about Elliott’s plans for SoftBank, Mr. Son said he had met with representatives from the hedge fund and had a “good discussion.”

“In principle, we would like to have a buyback,” he said, without committing to the idea.

“All shareholders want their investment to grow, whether silent shareholders or noisy shareholders,” he said, adding “we are all in the same boat.”

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