Are there two sides of the SoftBank ledger?

Linda J. Dodson

In Tokyo, Son was quickly forced on to the defensive, insisting that SoftBank was not “SoftPunku” – punctured by its bad experiences. But after a string of blow-ups, is there really another side to its ledger? “The situation with Wirecard came as a shock to the whole market,” says Rolf Bulk, equity research analyst at New Street Research. “It’s clearly a blemish on the SoftBank portfolio.”

It is not the only blemish this past year. Last month, SoftBank announced a historic $13bn annual loss, compounded by a botched float by office space start-up WeWork and a slew of other fallen bets, including robotic pizza start-up Zume.

Analysts say Softbank’s attempts at a turnaround hinge on the ability of portfolio companies to get through the current health crisis.

“The investor base is pretty much bifurcated between people who say this is an outrageous company throwing money around, desperate to spend $100bn anywhere, and people who say no, there’s method in this,” says Richard Kaye, fund manager at Comgest, an asset management firm with a $50m stake in SoftBank.

But there could be some successes in the mix. SoftBank’s London-based Vision Fund, led by former Deutsche bank trader Rajeev Misra, has invested more than $76bn into 88 start-ups, which Bulk says have a total cash balance of $50bn and $10bn in debt.

“That should allow most of those portfolio companies to weather the current crisis,” he says.

Overall, the Vision Fund’s aggregate loss for the past year is just under $1bn, with 26 investments increasing in valuation by $13.4bn, while 47 of its investments have decreased in valuation by $14.2bn.

“In the context of this crisis, it’s arguably not that bad,” says Bulk. “But a potential second [coronavirus] wave is a risk for that group, considering how many of those companies are gig economy companies.”

Since the fund’s inception in 2017, which involved a mixture of $60bn in debt and equity from investors in the Middle East, it has returned more than $10bn to backers. Within three years, the fund has seen eight of its companies listed on the public markets, with the total value across all of them rising $3bn since March.

That includes the likes of Uber, the transport business that has had a rough ride as taxi bookings have plummeted, though Bulk sees silver linings in its food delivery operations.

Revenue for Uber Eats jumped 53pc to $819m in the first three months of 2020. “Going out of this crisis, the bull case on Uber would be that its Eats business will sustain part of the current momentum that has built up, while the ride-hailing business will convert to levels seen previously,” Bulk says.

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