SoftBank Group Corp reported losses of nearly $18 billion at its much-vaunted Vision Fund, the heaviest in the Japanese conglomerate’s history, after it wrote down the valuations of quite a few of its most prominent portfolio companies.
It also warned of the likelihood of 15 of its portfolio firms going bankrupt in the wake of the Covid-19 pandemic.
Masayoshi Son, founder of the Tokyo-headquartered strategic holding company, warned during an earnings presentation on Monday that a number of its unicorns (those with valuations of $1 billion or upwards) had fallen into what he described as the “Valley of the Coronavirus,” while another 15 were expected to “fly over the Valley.”
The Vision Fund’s losses were headlined by the poor stock performance of ride-hailing major Uber, which contributed $5.2 billion to its overall losses, while WeWork, the troubled offices spaces provider, added another $4.6 billion.
The rest of the Vision Fund’s portfolio contributed $7.5 billion to its overall losses, as Son, on multiple occasions during the presentation, compared the fallout from the ongoing Covid-19 pandemic to the Great Depression of the 20th century.
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Son said that the $75 billion its Vision Fund had invested across 88 companies were now worth less than $70 billion. However, he refused to term the performance of the massively ambitious Vision Fund as poor, calling it “so-so” instead.
“For the 15 risky companies, we will not provide financial support to rescue them,” Son said, adding that he was still hopeful that the Fund will achieve its target of 20% internal rate of return.
The Vision Fund will also keep paying 7% returns to its Limited Partners that hold $40 billion worth of preferred equity stock
The company is also unlikely to bring in outside investors for other Vision funds, given the shaky performance of the first $100 million investment vehicle, and will continue placing bets using its own capital.
Son said that SoftBank will be far more cautious in evaluating new investments going forward.
He, however, continued to profess confidence in hospitality chain Oyo Hotels & Homes, in which SoftBank has invested an estimated $1.5 billion, stating that smaller hotels should consider tying up with the Gurugram-headquartered company, to take advantage of the technology being built by the latter.
Ritesh Agarwal-founded Oyo has, however, been forced to furlough and lay off thousands of employees, while also making a retreat from certain markets across the globe, as it struggles to survive during the pandemic.
In an earlier interview with ET, Rajeev Misra, the India-born CEO of the Vision Fund had said that it had marked down the value of Oyo from the $10 billion it had commanded till recently.
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