After the year SoftBank just had, this is probably the last thing its shareholders want to see.
One of SoftBank’s last two remaining non-executive directors is stepping down from its board after 18 years, removing perhaps the company’s biggest internal skeptic, according to a Reuters report.
Tadashi Yanai, the CEO of Uniqlo owner Fast Retailing and a longtime Masa advisor, said he’s leaving SoftBank to focus more on expanding his own business into new markets, including Italy, India and Vietnam. With a net worth of $25 billion (according to Forbes), Yanai is the wealthiest person in Japan. But at SoftBank, he was known as a close ally and sometimes critic of Masayoshi Son credited with attempting to rein in some of Masa’s more reckless tendencies.
But whatever his reasons for leaving, the fact remains that Yanai’s departure comes at a time when his more conservative outlook is badly needed.
In one of his most famous quotes, Yanai said “Dreams are all good, but nothing beats realistic management. Let’s keep our feet firmly on the ground.”
Unfortunately, the word “Realistic” was never a big part of Masayoshi Son’s vocabulary. As his reputation as one of the world’s greatest momentum investors grew, Son pushed his firm toward ever-larger bets on Silicon Valley startups, leaving firms like Uber and WeWork with outrageous valuations that many analysts found difficult to justify.
After WeWork scrapped its planned IPO, SoftBank was forced to swoop in with a rescue package to stave off an imminent WeWork bankruptcy filing.
Then, in its Q3 earnings report, SoftBank suffered a staggering $4.6 billion writedown on its WeWork investment. But that wasn’t all: In addition to the WeWork fiasco, SoftBank’s ill-advised bets on Uber and Slack, both of which flopped after their long-anticipated IPOs this year, bringing the firm’s losses in 2019 to somewhere around $10 billion.
After the WeWork fiasco, shareholders were calling for Masa to step aside. Instead, the SoftBank founder and chairman acknowledged that “there was a problem with my own judgment, that’s something I have to reflect on.” He promised to be more conservative in the future.
But according to the FT, it appears that Masa has already changed his mind. Despite the failure of the first SoftBank Vision Fund, a $100 billion pot of mostly Saudi money used to invest in dozens of tech startups, sources close to Masa say the chairman wants to continue investing aggressively by raising a Vision Fund 2 (though it’s not clear where he intends to find the money and investors, now that the Saudis have reportedly soured on their relationship with SoftBank, and Japanese Telecom/Tech/VC/whatever conglomerate’s reputation as a responsible steward of capital lies in tatters.
Back in 2017, Yanai told a weekly Japanese business newspaper that his role was to raise sometimes painful questions.
“I realise he has a knack for investing, but if he’s going to make use of his ability, I want him to be successful as an entrepreneur rather than as an investor,” Yanai said in an interview with weekly paper Nikkei Veritas at the time. “I want him to focus on his core business.”
During a presentation last month, Son joked about being scolded by Yanai, and said his longtime friend could be a “scary external director” at times.
Shortly after, Bloomberg published the latest edition of Bloomberg Businessweek with a cover lampooning Son’s many investing failures.
— Ivan the K™ (@IvanTheK) December 27, 2019
At this point, remaining SoftBank investors should be trying to figure out exactly why Yanai left. Was he simply exhausted after 18 years of service on the board? Or was it Masayoshi Son’s hubris that drove him out the door?
Whatever the reason, with Yanai out, SoftBank’s board is now composed almost entirely of SoftBank executives and employees. That’s definitely a recipe for a more insular company, and more “yes” men surrounding Masayoshi Son.