SoftBank Founder Calls His Judgment ‘Really Bad’ After $4.7 Billion WeWork Hit

I am sure that this is only the beginning of other massive write-offs similar to the dot-com era in the early 2000’s... Aivars Lode

TOKYO— Masayoshi Son, the billionaire founder of SoftBank Group Corp. , said Wednesday his “really bad” judgment championing U.S. office-sharing company WeWork left the Japanese conglomerate and its massive tech-investment fund with the biggest quarterly loss in its 38-year history.

Standing in front of a screen projection of stormy seas and dire Japanese-language headlines, Mr. Son told a news conference in Tokyo that he had made serious errors in judgment that led the group to post earnings “of the deepest red.”

SoftBank and the Vision Fund wrote down the value of their WeWork stakes by $4.7 billion and $3.5 billion, respectively. The $100 billion Vision Fund also wrote down the value of its holdings in U.S. ride-hailing company Uber Technologies Inc. and about 20 other investments, leading to an operating loss—the fund’s first—of nearly $9 billion for the quarter, and a group-wide net loss of $6.4 billion.

“My own investment judgment was really bad. I regret it in many ways,” Mr. Son said.

Mr. Son is fighting to preserve his reputation as one of the world’s savviest and most influential technology investors after the spectacular collapse of one of his most prized portfolio companies and the tumble in value of several others.

WeWork, officially known as the We Co., lost almost $40 billion in value after an attempt to go public backfired a few months ago amid widespread skepticism about the company’s profitability and management. 

All told, SoftBank and the Vision Fund have plowed nearly $20 billion in debt and equity into WeWork, yet value the company at less than half that, at $7.8 billion.

SoftBank had recently stepped in with a $9.5 billion bailout that boosted the group and Vision Fund’s stake in WeWork to 80%. 

The collapse was particularly embarrassing for Mr. Son because he had pushed for the investment in WeWork—which before the October bailout had totaled more than $10 billion—and championed its founder, Adam Neumann. Mr. Son said he had been too enamored of Mr. Neumann’s positive qualities and turned a blind eye to negatives, including governance problems.

Mr. Son pledged never to mount another rescue of a portfolio company and said SoftBank and the Vision Fund were now using the ability to turn a profit in the future as the premier yardstick for measuring the value of its investments. He said the group is working on guidelines to ensure good governance at its portfolio companies.

Yet Mr. Son also mounted a spirited defense of the Vision Fund’s overall performance and outlook, saying that despite last quarter’s write-downs the fund still had investment gains of $11 billion since its inception in 2017. Mr. Son said the Vision Fund’s return was well north of 13%.

Mr. Son also said his plans for a second Vision Fund of about the same size as the first continue to move forward, despite the WeWork mess. Some potential investors have become more cautious but haven’t pulled out, and many of the first fund’s investors are still interested in putting money in its successor, he said. “There’s no need for me to be so overcome with regret that I wither away,” Mr. Son said. “The vision remains the same.”

By Phred Dvorak and Megumi Fujikawa - Wall Street Journal