(Bloomberg) – The founder of SoftBank Group Corp. Masayoshi Son is used to praise and encourage shareholders. But the $ 34 billion loss in the company’s market value last year is a test for even its most loyal fans when they gather for the annual shareholders’ meeting on Friday.
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Investors were stuck by Son when SoftBank announced a portfolio company strategy in 2015 to take advantage of its stable but profitable domestic telecommunications business to become the world’s largest investor in volatile tech startups. When the Vision Fund closed a $ 18 billion loss on investments such as WeWork and Uber Technologies Inc. in 2020, they highlighted Son’s ability to earn thousands of times the returns of Alibaba Group Holding Ltd. When Son was patient as the stock began a downward trajectory from a peak in March last year, they listened and stayed.
However, five years of $ 142 billion growth now led to a record loss of $ 2.1 trillion yen ($ 15.4 billion) for the company in the quarter ended March. Much of this can be attributed to the recent global tech sales and repression of China’s largest technology companies, but much can also be attributed to SoftBank pushing companies to make big, aggressive bets.
With SoftBank’s own financial strength still in place, shareholder confidence is nearing a tipping point, said Mio Kato of LightStream Research. Son needs to show how SoftBank adds value as an investor and take steps – such as further acquisitions of shares financed by Alibaba stock sales – to recover the share price, he said.
“Investors stay true to what they believe in your dream, but once they realize that things are not working out, confidence collapses in an instant,” Kato said.
Shareholders looking for signs of recovery see a portfolio flooded with red. SoftBank bet more than $ 12 billion on Chinese equestrian company Didi Global Inc., but Didi was delisted from the New York Stock Exchange less than a year after its IPO, and that share is now worth less than $ 3 billion. Shares of South Korean e-commerce company Coupang Inc. fell nearly 70% from a year earlier, and other listed companies – which represent only a fraction of its portfolio companies – have fallen similarly in value.
Anxiety remains high that large deletions may occur. Some portfolio companies have been forced to restructure or raise funds at lower rates. SoftBank-backed companies that recently announced staff cuts include Swedish payment company Klarna Bank AB and privacy management company OneTrust, while Bloomberg News reported staff cuts at chip Arm Ltd.
Questions also remain as to whether any of SoftBank’s board of directors is able to provide proper supervision. SoftBank’s board has lost its most independent voices in recent years, including outgoing CEO Lip-Bu Tan, who warned that Son “needs people to reassure him, give him advice and make him even more successful “in an open resignation letter. “Bad choices made too quickly can have negative consequences for the company.”
A key issue on Friday’s agenda is the appointment of David Chao by SoftBank to replace Tan as external director. Chao – co-founder and general partner at venture capital firm DCM – has previously invested in companies such as vertical farming startup Plenty Inc. and personal finance startup SoFi Technologies Inc., in which Vision Fund also invested. SoFi in 2017 was involved in an investigation into sexual harassment that led to the dismissal of its CEO.
“This seems like a continuation of the downgrading of the board’s oversight power,” Kato told Chao. “Given some of the scandals at SoFi in which he has invested, it is not a resounding applause for his ability to contribute to SoftBank’s better governance.”
SoftBank will make fewer and smaller deals this year, Son said. So far this year, SoftBank’s Vision Fund 2 average investment size has been about $ 100 million to $ 200 million in more than 50 rounds of financing, compared to about $ 900 million for Vision Fund 1. In January-March, Vision Fund distributed $ 2.5 billion, or less than a quarter of the $ 10.4 billion it spent in the previous quarter.
However, SoftBank’s emphasis on dizzying speed remains the same. Decided to invest in Japanese AI Medical Service Inc. within two months of a 30-minute Zoom meeting in February between founder Tomohiro Tada and Son. After the presentation of the company by Tada – which uses artificial intelligence to help clinicians detect potential stomach and bowel cancers – Son spent 15 to 20 minutes asking for numbers to support the accuracy of AIM technology. , said Tada.
Minutes after the call, Sean suggested that Tanta ask for up to $ 74 million, double the amount Tanta had suggested. The two also considered possible business models for when AIM would be scaled up, Tada said. After an intense two weeks of about 150 email exchanges, SoftBank in April led a $ 59 million round of financing to AIM.
Due to Covid-related precautions, only 150 shareholders will attend Friday’s meeting at SoftBank headquarters in Tokyo, which will be streamed through a web portal. Son will receive questions selected from those submitted in writing online, SoftBank said.
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