Even strongly backed by the Japanese powerhouse Softbank Group, Uber and WeWork didn’t walk away unharmed of their market debuts. While the first had an underperforming IPO, with a lower offering than what was expected by Wall Street and since then, a series of drops in its shares; the second had to withdraw its long-awaited debut in the stocks exchange, once the real-estate startup was registering growing losses and problems of management, not being able to prove its profitability to investors. WeWork’s valuation has plunged from an initial $47 to only $7.8 billion at the end of September.
Now the bill is on Softbank’s table: the investment group is finally disclosing how much are the losses due to its bets on Uber and WeWork. And we are talking about $6.5 billion. “Son’s handling of WeWork raises some fundamental questions about his investment strategy that need to be addressed,” said Jefferies Group senior analyst Atul Goyal, right before the earnings release, according to Bloomberg. “There will be more failed investments in the future, how does he plan to handle them?”
A strategy that values growth over profitability is now being challenged by the recent events with companies that take part in the Japanese conglomerate’s portfolio. If Uber and WeWork – once the biggest starts among Softbank’s bets – saw their valuations plunge, raising investors’ skepticism; there are several concerns that other players backed by Softbank could follow the same path.
In numbers, while analysts were expecting around 230.8 billion in losses, the Japanese company easily surpassed this projection, registering an operating loss of 704.4 billion yen in the third quarter. As for their Vision Fund, well-known for its great startup investments, the loss reported reached 970.3 billion yen in Q3. The Tokyo-based firm also revealed that its 88 investments were worth about $77.6 billion, which shows a 9.8% increase in value when comparing to the price at which Softbank acquired the stakes. From their portfolio, 25 companies have increased market value, whereas the other 25 registered drops in their valuations, according to what the investment firm has reported.