Issues at WeWork have hit the Japanese investment powerhouse hard, with its chair taking much of the blame.
SoftBank’s reputation – and bank balance – is being hit hard, according to the Associated Press, which reported that the Japanese investment giant posted its first quarterly loss in 14 years, totalling around $6.4bn.
Much of this has been down to a series of issues with one of its big investments, WeWork, following a profile by the Wall Street Journal on Adam Neumann, the former WeWork CEO. The publication cited sources who claimed he was erratic and, in one instance, fired 7pc of WeWork’s staff and held a party immediately after for those who had not been let go.
‘The perception is that SoftBank is being dragged down into the quagmire of WeWork’
– MASAYOSHI SON
SoftBank later asked WeWork to shelve its planned IPO, fearing the controversy surrounding the situation could dissuade investors from supporting the second iteration of its Vision Fund. The Japanese firm then decided to pump $9.5bn into WeWork last month as part of a rescue package that saw it take an 80pc stake in the company.
For its latest financial quarter, SoftBank took on a charge of $4.6bn from the resulting WeWork fallout. Also, continued losses at Uber – another key SoftBank investment – amounting to $1bn in the last quarter, has added further to SoftBank’s financial woes.
WeWork ‘not a sinking ship’
SoftBank’s chair and chief executive, Masayoshi Son, admitted there were “mistaken investment moves” and that the negative pieces on WeWork were “true in some sense”. However, he claimed that the situation is now under control.
“The perception is that SoftBank is being dragged down into the quagmire of WeWork,” he said. “I am looking back with true regret about the mistaken investment moves that I have made.”
He also emphasised that WeWork is “not a sinking ship” and that SoftBank’s chief operating officer, Marcelo Claure, will be brought in to bolster the shared workspace company’s corporate governance.
However, speaking with Bloomberg, Jefferies Group senior analyst Atul Goyal was critical of Son’s role in the WeWork crisis.
“Son’s handling of WeWork raises some fundamental questions about his investment strategy that need to be addressed,” he said. “There will be more failed investments in the future, how does he plan to handle them?”