SoftBank slumps to $5.2bn quarterly loss as WeWork, tech investments bite

SoftBank Group booked a $5.2bn quarterly loss on Thursday, its fourth straight quarter in the red, as the Japanese giant took a hit from the bankruptcy of the once high-flying WeWork and wrote down the value of tech investments.

It was a fresh reminder of the volatility inherent in founder Masayoshi Son’s strategy of betting big on often risky start-ups. WeWork sought US bankruptcy protection on Monday, cementing the remarkable fall of a start-up that had once been valued at $47bn.

The results also show how unfavourable currency rates can deal heavy blows to big companies. Weakness in the yen drove up the cost of the Japanese conglomerate’s dollar-denominated debt.

SoftBank reported a ¥789bn ($5.2bn) net loss for the three months to end-September, compared with a ¥3-trillion profit a year earlier when it sold a large portion of its stake in Chinese e-commerce giant Alibaba.

Its Vision Fund investment unit, meanwhile, booked an investment profit of ¥21.4bn in the latest quarter, after posting a ¥160bn profit three months earlier.

SoftBank CFO Yoshimitsu Goto said he believed the group had seen the worst and was moving towards profitability. Chip designer Arm, which went public during the quarter, would be the new driver of value for SoftBank, he added.

WeWork, whose meteoric rise and fall stunned investors, sought bankruptcy protection after its bets on companies using more of its office-sharing space soured.

SoftBank said it had exchanged unsecured WeWork notes into shares and convertible bonds, logging a ¥21.6bn loss from the transaction in the first half.

While SoftBank has largely written down billions of dollars of investment in WeWork over the years, it said on Thursday its pledge to provide credit support for WeWork increased the investment firm’s liabilities by ¥57.5bn last quarter.

Reuters