Well-known tech investor SoftBank Group suffered a massive loss as stocks of WeWork and Uber, which the company has invested in, dropped in value. The estimated loss that the company made at the end of September worked out to around $6.4 billion. Softbank’s losses stem from the poor performance of the businesses that the venture capital firm has invested in. In a presentation to investors on the 6th of November, Masayoshi Son, who runs the group, admitted that his faith in WeWork founder Adam Neumann was misplaced and apologized for involving the company in the fiasco.
WeWork Ruins the Company Record
SoftBank initially invested venture capital in WeWork, which claimed that it would be able to make money by selling working holidays to professionals. However, WeWork’s parent company WeCompany was forced to give up its plan of an IPO after queries about the massive valuation of the office-space rental company came up. Because of that setback, SoftBank had to spend over $12 billion to bail the company out. The bailout resulted in WeWork losing over $10 billion of its value estimate.
Uber Also a Concern
SoftBank also invested significant amounts of capital in rideshare operator Uber. While the company has been very prominent in its innovation and the press, it has been seeing some trouble making a profit recently, adding to SoftBank’s woes. The company’s shares fell to an all-time low on the 5th of November, after posting a loss, even though it surpassed its revenue estimates. The lock-up period for Uber’s shares expires on the 6th of November, meaning that investors will be able to sell.
A Difficult Quarter
SoftBank is still a massive investor, but these losses, coupled with a handful of bad decisions, could be dangerous for its future outlook. Son had stated that he intends to raise a second Vision Fund to invest in more tech startups. However, the high-risk, high-reward gamble only pays off if the company takes off and can justify the initial investment. Making significant bets on small companies might still pay off, but Son would have to convince the board to invest the required money into his plan.