For more than a decade, the Japanese conglomerate SoftBank has reported profit after profit on each quarter. However, that streak has apparently now ended as the company reported its first loss in over a decade. The loss was blamed on the company's big bets on tech startups, which have mostly proven to be big money pits that had costs the company billions of dollars.
SoftBank CEO Masayoshi Son mentioned during the company's earnings call on Wednesday that they simply just had a very terrible quarter. The investment guru stated that they had learned a "hard lesson" from their recent bets and the relative collapse of the company's they had backed, namely WeWork and Uber.
WeWork's failure to go public and the issues surrounding its founder compounded with the drop in Uber's share prices had cost SoftBank's Vision Fund around $8.9 billion. The massive loss essentially wiped out all of the company's earnings across the rest of its operations. This resulted in the company's first quarterly loss in close to 14 years.
Despite its mistakes, the executive clarified that he still had full confidence in his company's $100 billion Vision Fund. Masayoshi Son explained that he was still willing to place even more money into the fund for it to be used in major investments in advanced technologies such as artificial intelligence and cloud computing.
A huge chunk of Wednesday's earnings presentation was spent detailing the cause of the losses in the company's WeWork and Uber investments. SoftBank was apparently forced to give WeWork a $10 billion rescue package, effectively lowering its valuation from a high of $47 billion to $7.8 billion. The package gave the company's controversial founder, Adam Neumann, a hefty $1.7 billion exit package.
Son mentioned during his presentation that he had "overestimated" Neumann's good side and that he had simply turned a blind eye to the things he had seen that was happening within the company. Son explained that what they had learned from the experience was that they have to put more focus on governance for all of their company's management and even its founders.
After having explained what had gone wrong with WeWork and Uber, Son stated that he was still determined to put up a second Vision Fund. The first Vision Fund was apparently still experiencing massive growth in terms of cumulative investments.
Apart from Uber and WeWork, the Vision Fund was able to make profits on some of the companies it had backed. This includes a stake in Slack, which is apparently now worth around five times what the fund had paid for it. Other successful bets include the fund's stake in Guardant Health, which is now worth twice what the fund had paid for it.
