SoftBank's Masayoshi Son predicts 15 of the companies in its $100 billion Vision Fund will go bankrupt

No surprise to many of us as stated in my previous posts... Aivars Lode

SoftBank founder Masayoshi Son's $100 billion Vision Fund is becoming less generous with cash handouts to the companies in its portfolio — and Son now predicts that 15 of those companies will go bankrupt.

Son said in a new interview with Forbes that, in the wake of WeWork's failed IPO last Fall and a plummeting market value amid coronavirus, the SoftBank Vision Fund will withhold cash infusions to save its foundering bets and instead focus on companies that seem likely to break out.

"I would say 15 of them will go bankrupt," Son predicted, adding that he expects at least another 15 of the company's 88 bets to succeed.

It's part of Son's plan for SoftBank to return $150 billion in order to pay back its limited partners while remaining profitable. Its Vision Fund has a reputation for making huge investments in companies with high growth and high spending, like WeWork, Uber, and Doordash, but its market value has slid in the past month as coronavirus makes profitability seem increasingly out of reach for many startups.

SoftBank already backed away from its plan to buy $3 billion worth of WeWork shares last week, alleging that WeWork failed to meet its conditions as it faces civil and criminal investigations into the company. Almost $1 billion of that deal would have gone to WeWork ex-CEO Adam Neumann.

Son, who lost billions when the dot-com bubble popped 20 years ago, is now working to convince SoftBank's investors that the fund can weather a potential recession spurred by the coronavirus epidemic.

"In the beginning of the internet, I was criticized the same way," he told Forbes. "Tactically, I've made regrets ... but strategically, I am unchanged. Vision-wise? Unchanged."

Read Son's full interview with Forbes here.

By Aaron Holmes - Business Insider

The life savings of everyday Australians are at risk

I have blogged about how pension funds will have to redeem stocks because private equity  will not deliver and that will have a cascading effect. Well I was right about the pension fund redemptions but the trigger was not private equity. Their mark downs, however, will further exacerbate the situation... Aivars Lode

The failure by super funds to write down unlisted assets appropriately has created a dangerous instability that could cost ordinary Australians their life savings and needs to be urgently fixed.

As we move into Q2, some serious decisions need to be made to protect the life savings of everyday Australians.

There is a first-order problem, which has to be addressed soon. Then there is a broader policy challenge, where reform of the superannuation sector needs to be prioritised.

Bear with us, as some numbers are required to illustrate.

Think of a hypothetical super fund with $50 billion in assets under management as at December 31. Assume that the fund has 1 million members, most of whom are eligible to access two instalments of up to $10,000 under the Treasury’s current plan, applications for which open on April 20.

Assume as well that the fund has a high level of concentration in unlisted assets, such as infrastructure, property, private equity, structured credit and alternatives. Let us say a 40 per cent weight, for example, with the balance held in more traditional assets such as equities, bonds and cash.

As at March 31 this hypothetical fund reports that performance has deteriorated significantly due to COVID-19. Let us say from up 10 per cent for the financial year at end December, to now down 10 per cent.

With Australian shares down 25 per cent for the quarter, a result like this would probably be expected. Indeed many actual super funds, including those we briefed on COVID-19 through early February on a gratis basis, will report much worse than this.

The problem is the unlisted assets.

If our hypothetical fund refuses to write down the value of these assets to realistic levels, the resulting unit price will be artificially high.