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SoftBank suffers $6.4bn quarterly loss as WeWork investment sours

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Via Financial Times

SoftBank reported a quarterly net loss of ¥700bn ($6.4bn) after its outsized investment in crisis-hit property group WeWork soured, jeopardising Masayoshi Son’s ambitions to launch another $100bn investment fund. 

The dismal results on Wednesday came two weeks after SoftBank agreed to a $9.5bn package to rescue the US office-sharing group following an aborted attempt to go public.

The WeWork debacle has been a rare blunder for Masayoshi Son, the billionaire founder of SoftBank and an aggressive dealmaker who claims to be guided by a gut feeling in picking winners in the technology industry.

“I made a bad investment decision and I am deeply remorseful,” Mr Son said at a news conference. “But there is no change to my strategy or vision.”

His most successful bet has been an early investment in Alibaba, but even gains related to the Chinese ecommerce group did not help to offset unrealised valuation losses totalling ¥537.9bn ($4.9bn) related to WeWork and a decline in share price for ride-sharing group Uber. 

For the July to September quarter, the company reported a net loss of ¥700bn, falling far below analyst estimates of a net loss of ¥241bn and compared to its year-earlier profit of ¥526bn.

Adam Neumann, the WeWork cofounder, helped to convince SoftBank to commit $10.65bn to the company, but governance concerns killed WeWork’s hopes for an initial public offering after it failed to fetch even a $15bn valuation from investors.

Mr Neumann was ultimately forced out of the company, but not before he secured a controversial $1.7bn exit package even as 4,000 WeWork employees are to be fired.

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The crisis at WeWork fuelled concerns among investors about the Vision Fund’s investments in other companies, and darkened prospects for SoftBank to launch a second fund after its first Vision Fund pumped $70bn into 88 companies.

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