SoftBank may have succeeded in stiffing WeWork shareholders out of $3 billion, but the company recently informed shareholders that its loss for the fiscal year ended in March was even larger than it had anticipated, largely due to WeWork, though the company's investments in Uber and a handful of other startups that failed or shut down over the last six months have also hurt.
With its debt trading deep in junk territory, the reputation of the company's founder-chairman Masayoshi Son lies in tatters, as the coronavirus outbreak essentially sealed WeWork's fate after a string of blowups among other SoftBank and Vision Fund portfolio companies.
In a matter of months, a man once heralded as the greatest momentum investor of a generation is just the guy who thought WeWork's low-margin, hyper-cyclical core concept might be worth $54 billion. Even Goldman's clients couldn't swallow that one.
Now, SoftBank's international arm is laying off 10% of its employees as it continues to try and cut costs after its worst run ever.
SoftBank Group International, an arm of SoftBank Group Corp. led by Marcelo Claure, has cut roughly 10% of its staff as part of a plan to operate more efficiently, according to people with knowledge of the matter.
The reductions affected about two dozen employees in cities including San Carlos, California, and Miami, according to one of the people, who asked not to be identified because they haven’t been made public. SoftBank Group International is prioritizing enabling its portfolio companies to emerge from the coronavirus pandemic in a stronger position, while continuing to make selective investments, the person said.
In addition to the job cuts, two managing partners of SoftBank’s $5 billion Latin America fund, Murtaza Ahmed and Andres Freire, voluntarily departed, one of the people said. Mike Bucy, an operating partner at the firm who had been appointed as WeWork’s chief transformation officer in November, also has left SoftBank of his own accord, the person said.
A SoftBank spokeswoman declined to comment.
SoftBank said this week it expects a wider net loss for the fiscal year ended in March, because of deeper struggles at one of its largest investments, office-sharing startup WeWork. The Japanese conglomerate expects to lose 900 billion yen ($8.4 billion), up from a previous estimate of about 750 billion yen.
Its Latin America fund has backed companies including Colombia-based delivery startup Rappi, Brazilian fitness company Gympass and Argentine financial-technology firm Uala.
For those who haven't been following along lately, here's a summary of what's going on with the guidance, according to Pitchbook.
In light of steeper losses from its WeWork investment, SoftBank has again revised its annual guidance for the latest fiscal year.
The Japanese tech giant now expects a net loss of 900 billion yen (about $8.4 billion)—150 billion yen more than it announced over two weeks ago. SoftBank said its investment in WeWork, as well as its loan commitment and financial guarantee for the co-working company, was responsible for about 700 billion yen in losses.
The new guidance follows an announcement in mid-April, when SoftBank told investors it expects the value of its Vision Fund portfolio to drop 1.8 trillion yen. Earlier this month, WeWork sued SoftBank, its largest investor, for backing away from a $3 billion tender offer that SoftBank said would primarily benefit founder Adam Neumann and fellow investor Benchmark.
Many SoftBank-backed companies showed signs that they were struggling before the coronavirus pandemic; the crisis has only exacerbated those problems. In recent months, real estate tech startups Opendoor and Compass, construction tech provider Katerra and restaurant robot-maker Zume have each reportedly laid off hundreds of employees. And internet satellite company OneWeb has filed for Chapter 11 protection.
And you haven't heard the worst part yet: It looks like there's more pain to come as Masa Son pledges more of his personal fortune against the company's debt, allowing him and his team to remain in control, so they can make more of the bad decisions that brought what had been a Japanese global champion to its knees.