Area Investment Firm Admits WeFuckedUp

SoftBank chairman and CEO Masayoshi Son during an press briefing on Wednesday in Tokyo. (Photo: Kazuhiro Nogi, AFP via Getty Images)

SoftBank chairman and CEO Masayoshi Son admitted during a Q2 earnings presentation on Wednesday that he really screwed the pooch with respect to that whole WeWork clusterfuck, according to reports.

In the last few months, WeWork—which has tried to couch itself as a visionary tech company instead of a cult-like, dangerously overleveraged real estate firm—attempted to go to initial public offering at an unintentionally hilarious valuation of $US47 ($68) billion. It didn’t go so well, with the company’s intended mega-debut instead drawing attention to overvaluation concerns and matters like former CEO Adam Neumann’s bizarre behaviour and ethically questionable deals. SoftBank, a major investor through subsidiaries and its Vision Fund, was forced to bail out WeWork in a deal that valued it at just $US8 ($12) billion, around 82 per cent off that $US47 ($68) billion. SoftBank lost $US4.6 ($7) billion in the process.

“My own investment judgment was really bad,” Son told investors, according to the Wall Street Journal. “I regret it in many ways.”

“In the case of WeWork, I made a mistake,” Son also said, per the New York Times. “I won’t make any excuses. It was a very harsh lesson.”

Son also added that SoftBank was wrong to give Neumann such a high degree of unilateral control over the company, and alluded to the $US1.7 ($2) billion exit package the co-founder received out the door: “This type of exception will not happen again.”

“I overestimated Adam’s good side,” Son said, according to the Times. He added that with respect to “his negative side, in many cases, I turned a blind eye, especially when it comes to governance.”

The Journal reported that Son also promised to never bail out any portfolio company ever again, as well as that SoftBank and the Vision Fund would use profitability as its main metric for valuating companies. He also touted a 13 per cent return on the Vision Fund portfolio since it began in 2017, WeWork notwithstanding. (The Times wrote that figures released by SoftBank appear to show that the company lost $US6.4 ($9) billion in the past three months.)

“There’s no need for me to be so overcome with regret that I wither away,” Mr. Son told investors. “The vision remains the same.”

Good luck with that: While some of SoftBank’s investments, such as Chinese e-commerce giant Alibaba, have exploded, others such as Uber and Slack are not paying off. Shares in Uber hit a record low of $US25.58 ($37) on Wednesday before bouncing back to just shy of $US27 ($39) after the expiration of a lockup period, which frees major shareholders like executives and investors to dump stock. That is 40 per cent off its IPO price of $US45 ($65), with Wedbush Securities analyst Dan Ives telling CNBC the company is a “train wreck” that stands to lose more this week.

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