8 ms·
SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil
- rapsey 7y agoVision Fund is probably pretty dead. I can't imagine anyone giving them money in the future.
- soavepkyuvyu 7y agoWhy? Could you elaborate on this?
- FartyMcFarter 7y agoThey invest in lots of crap companies: https://www.ft.com/content/25f76710-fbde-11e9-98fd-4d6c20050229 https://www.ft.com/content/25f76710-fbde-11e9-98fd-4d6c20050...
- Havoc 7y agoThink you'd be surprised. One bad quarter for a guy that talks about 300 year timescale.
- rcMgD2BwE72F 7y agoWho's this guy and where his money come from? If it's based on fossil fuel revenues seized by autocrats, please explain how his plan can be sustained for centuries.
- simonh 7y agoHe's a Japanese investor. While a significant amount of the funds he invests originated from oil money, his actual investments are in technology companies, so the future revenues and valuations of his investments are not based on oil.
- dunkelheit 7y agoWell if he doesn't get too fussy about investing revenues specifically from fossil fuels and diversifies into simply investing money seized by autocrats regardless of its source then it is a plan that can be sustained for millenia.
- diffeomorphism 7y ago"This guy": https://en.wikipedia.org/wiki/Masayoshi_Son https://en.wikipedia.org/wiki/Masayoshi_Son > If it's based on Not really. Son himself got most of his money from investments into Alibaba. What you are probably referring to is that the Saudis are large investors of the vision fund. I don't share your optimism that there won't be insanely rich people with little accountability in the centuries to come.
- malenm 7y agoNPR Planet Money podcast recently did an episode all about it: https://www.npr.org/2019/10/04/767379358/episode-943-unicorn-cowboy https://www.npr.org/2019/10/04/767379358/episode-943-unicorn...
- tasssko 7y agoIn my view 300 year timescale and technology investments are antithetical.
- Havoc 7y agoNot if the initial thesis is correct - which I think it is in this case. If you corner a market space that is key for future tech then it'll be very difficult for anyone else to catch up - even if tech moves forward.
- empath75 7y agothat's a lot of bad quarters.
- svara 7y agoThey have substantial investments in ARM and NVidia which seem more reasonable...
- whatok 7y agoThey sold their entire stake in NVidia early this year and the total amount paled in comparison to the amount of losses/capital injections they did on WE.
- threeseed 7y agoVision Fund has an investment horizon in the decades. So the idea that it is dead is just ignorant. And there is plenty of capital and not many decent investment vehicles so expect Vision Fund 2 to do just fine.
- whatok 7y agoYou can have an "investment horizon" of whatever arbitrary time period you want to make up but if your companies continue to lose money and continue to require additional capital raises just to operate, your "investment horizon" might get cut a bit short.
- atupis 7y agois this a sign of bubble popping? although I am not sure can this spread outside of Saudis and Softbank.
- pearjuice 7y agoWhat bubble?
- bradleyjg 7y agoThe one where large, mature companies are priced in multiples of revenue rather than earnings.
- deleted 7y ago[deleted]
- davnicwil 7y agoI don't think it is, it seems more like very easy access to capital was (mis)used in some specific cases to build very capital intensive businesses that only really scale linearly with additional capital invested (where they're supposed to scale exponentially obviously). It's more like an inefficiency within the VC system that has been exploited and lots of money wasted, and hopefully lessons are learned. I don't think it says anything much at all about the fundamentals of the broader industry.
- jussij 7y agoThe last decade has seen global monetary policy create a situation where cash is very cheap (i.e. many central banks are now offering close to zero interest rates and some have actually seen negative interest rates). That cheap cash then finds it's way into assets like stocks and housing with that cheap money putting upward pressure on those assets. In that same climate we have seen a decade long stagnation in wages, next to zero inflation and we are now entering a stagnated and slowing global economy. With those contradictory growth signals, the real question is how long will that cheap keep flowing, as it is the only stopping those artificial asset bubbles from popping.
- 7y ago
- Traster 7y agoIt seems pretty clear that Softbank were badly misvaluing We and Uber. The second they hit the public markets suddenly Softbank could no longer sustain their paper valuations which is causing this loss. It's kind of funny that Softbank can mark its own homework on this - they buy the company and then because the investment isn't liquid they can basically choose any valuation they want for the companies they own. It'll be interesting to see how sceptical people are of the other companies in the Softbank portfolio. For example, they acquired ARM for $31Bn- what are they claiming it's worth now?
- sam_lowry_ 7y agoArm is a de facto monopoly, WeWork and Uber are not
- mtgx 7y agoArm is already freaking out about RISC-V, because some large companies (Western Digital, Nvidia, Alibaba, etc) have started preferring using the RISC-V ISA over Arm. Even Google's recent OpenTitan uses a RISC-V processor, when the company's own proprietary "Titan" predecessor used Arm Cortex-M3. It probably won't be long now before SoftBank/Arm resorts to patent trolling RISC-V chip makers.
- dana321 7y agoExactly. ARM's intellectual property (ie. CPUs) is used in more devices than Intel.
- juskrey 7y agoHow can one value something fat-tailed?
- treis 7y ago>Softbank were badly misvaluing We and Uber. I don't think these two really belong together. We is probably worth nothing, and even that might be generous. Uber is worth billions with the only real debate being how many billions.
- m00dy 7y agothen we can say success of a fund does not correlate with its volume
- nabla9 7y agoTaking huge risk and huge losses would be acceptable. But this is also a guy who fails to enforce the bare minimums for corporate governance in companies where he is the major shareholder.
- ckastner 7y agoIt's refreshing to see that the financial Shenanigans SoftBank was playing with WeWork and even Uber backfired like that in the end. Manipulating pre-IPO valuations as aggressively as they did was just insane.
- goatinaboat 7y agoManipulating pre-IPO valuations as aggressively as they did was just insane Never forget the endgame was to dump it at the inflated valuation on retail investors and pension funds. This was a heist on the scale of Madoff, if they pulled it off.
- rchaud 7y agoMarkets were already wary since the Uber IPO was a flop. WeWork was in the same class of "We're going to become a monopoly, so invest now!!" type investments. Like Uber, they failed to explain away the gargantuan losses. By trying to massage the financials in full view of the public, that close to the IPO was probably what killed the IPO altogether. I fear
- 0zymandias 7y agoOther investors have been saying that SoftBank has been overpaying for years. It looks like they were right and you need to discount any SoftBank valuation by about 50%. The SoftBank playbook has an even bigger negative impact on employees. They are granted options at an inflated price. When the stock collapses (Uber, WeWork, Wag) they lose more than others because most of the comp is in equity. As an employee, I would stay far away from any SoftBank funded company.
- alexpetralia 7y agoAnd, of course, they _paid_ for that comp (exercising of stock options) in cash.
- helltone 7y agoYou forgot improbable.
- wil421 7y agoSide note, is a Bloomberg subscription worth it? I’m looking to get a subscription and a lot of their articles are great. Especially ones by Matt Levine.
- rwmurrayVT 7y agoYou can subscribe to his newsletter and receive them daily to your inbox. I don't think he writes any articles outside of Money Stuff.
- wil421 7y agoThanks. Bloomberg has a $1.99 3 month subscription deal. I’ll try it for a few months and see for myself.
- john_minsk 7y agoPretty sure you will have hard time canceling it.
- SllX 7y agoDoNotPay will help with that.
- atty 7y agoEchoing the other comment, be careful. They probably make it extremely painful to end the subscription after the trial. It once took me well over an hour to end a trial subscription to the economist.
- wil421 7y agoThe last trial I did was for the economist...
- pierrebeaucamp 7y agoAs I few commenters are concerned about cancelling trial subscriptions at Bloomberg: I did just that earlier this year and it was rather painless. You have to submit a request through their website and wait a business day or so.
- cs702 7y ago$6.5B is the recognized loss, i.e., the lowest possible amount they can get away writing off on their accounting books. The real economic loss may be much higher.
- wjnc 7y agoTo agree with this. As someone with more of a general economic and metrics background, I was quite amazed when I first learned of the breadth of possible valuation methods IFRS (International Financial Reporting Standards) allows for. Some are pretty close to what you'd expect for the valuation of a financial instrument (after all, equity is one of those), while some are 'pretty far away'.
- SeanAppleby 7y agoAre you allowed to switch between them at will, or is there a legal inertia that pushes you to continue reporting using the same one?
- airstrike 7y agoI think he's talking about the levels of fair value measurement https://www.iasplus.com/en/standards/ifrs/ifrs13 https://www.iasplus.com/en/standards/ifrs/ifrs13 No anchor links on that page, so I'll just quote some snippets here: Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs inputs are unobservable inputs for the asset or liability. [IFRS 13:86] Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. An entity develops unobservable inputs using the best information available in the circumstances, which might include the entity's own data, taking into account all information about market participant assumptions that is reasonably available.
- 7y ago
- Twirrim 7y agoI keep thinking about Nick Leeson, the trader who caused Barings Bank to collapse. He was highly successful with his speculative trades, but eventually things got out of hand and he was having to make bigger and bigger gambles to try to recover the lost money, until it all fell apart on him. You can talk about being a fund with a view to 300 years of the future, but you're not going to get there if you act recklessly with the now.
- AzzieElbab 7y agoadam neumann should stop by saudi embassy
- dang 7y agoPlease don't do this here.
- AzzieElbab 7y agoYou are right
- KoftaBob 7y agoIt's like these investors never learn that the "our unit economics are horrible, but it'll be worth it when/if we become a monopoly!" philosophy rarely plays out well. The same industry that harps on about how disruptable old school monopolies are, is somehow buying into that? I don't get it.
- thrav 7y agoI mean, the strategy has created all of the biggest winners: Amazon, Google, Facebook, Spotify, eBay, PayPal, (maybe) Airbnb, etc. Each of them effectively monopolized something for close to a decade. It’s not a failed proposition; it just might be harder to pull off in some spheres than others, and harder as more money gets funneled into startups, and harder as the giants jump into your newly minted market, or acquire that new market.
- bpt3 7y agoIn the winners within your examples (I'm not sure why Spotify and Airbnb are on that list), the economics around their unit costs were fantastic, because they aren't selling physical goods or services. That's the main difference between those companies and WeWork/Uber: There's no way to drive margins low enough at those companies to justify valuing them like Google.
- anm89 7y agoNothing was stolen. Masa handed him the first ~5 billion after a 10 minute meeting, no due diligence, no anything. Then threw more good money after bad. And in the end ended up in a terrible position beholden to a scam artist. But that's very different from theft. He essentially took every possible step to ensure he ended up in this position.