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 last year.
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.
One year ago, SoftBank 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, it has weathered a number of major 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 then chief executive. In November, SoftBank said it had lost $4.6 billion on its investment in WeWork.
Other stumbles 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.
In a presentation on Wednesday, Mr. Son did not appear chastened. He played down concerns about SoftBank’s future, dismissing worries about the company’s enormous corporate debts and anemic returns on its portfolio of sometimes quixotic tech investments.
He also cited SoftBank’s victory in the United States the day before 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.
Mr. Son also showed a slide that from one perspective appeared to be a duck, but viewed from a different angle looked like a rabbit. The picture, he said, was a metaphor for how some analysts were valuing the company, placing their emphasis on the wrong aspects.
“The market view is still skeptical of us, that SoftBank might go bankrupt,” he said. “But that tide is turning.”
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.
At one 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. Now that dynamic is shifting.
Last week Elliott Management, the $40.2 billion hedge fund run by Paul E. Singer, emerged 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.
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February 12, 2020 at 03:12PM
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