SoftBank CEO Masayoshi Son won't call WeWork a rescue, saying instead that the latest financing allowed his company to dramatically reduce the average share price it paid for the coworking company. Nevertheless, he described it as an "exception" that won't happen again.
SoftBank will make "no investment for the purpose of rescue," Son told investors on Wednesday, after the Japanese conglomerate reported its first quarterly loss in 14 years. He said portfolio companies must be "self-financing," and "that's something that I would like to clearly extend my message to you."
Son acknowledged making some mistakes in his investment strategy and accepted that WeWork's dramatic fall in recent months has led some to question his judgment and the viability of SoftBank's massive Vision Fund. SoftBank recorded a 374.7 billion yen ($3.4 billion) writedown on its WeWork investment about two weeks after taking 80% control of the company with a new $5 billion financing package.
WeWork was forced to pull its IPO at the end of September because of mounting losses and an unwillingness of public investors to fund the business. SoftBank ousted former CEO Adam Neumann, who walked away with more than $1 billion, and installed Marcelo Claure, SoftBank's operating chief, as executive chairman. Son said there will be no future bailouts for SoftBank-backed start-ups.
The Vision Fund has deployed about $80 billion in less than three years, betting big and pushing private tech companies to expand as quickly as possible. On Wednesday's conference call, Son addressed concerns that the fund is facing more failures in the portfolio.
"Is there any other similar concern? In fact, yes, there is," Son said. "Like a dog-walking company and other portfolio companies, we may see similar problems surfacing."
While Son didn't mention the name of the dog-walking company, he's referencing SoftBank's $300 million investment in Wag, which has continued to struggle and is now exploring a sale.
SoftBank also took a loss on its investment in ride-hailing company Uber, which has seen its stock plunge 40% since its IPO in May to a record low on Wednesday. But some big Vision Fund investments are still performing. Son highlighted the fund's investment in Slack as a success story among the turbulence.
"Actually they have increased about five times compared to our invested amount," Son said. He also said SoftBank is doing well with its Guardant Health investment and its stake in 10x Genomics.
"There are many of those that are giving us a profit," he said. "But still market investors are becoming more careful."