SoftBank CEO calls WeWork investment ‘foolish,’ valuation falls to $2.9 billion

Corp CEO Masayoshi Son speaks during a joint announcement with Toyota Motor Corp. to create a new mobility services development company in Tokyo, Japan, October 04, 2018.

Alessandro Di Ciommo | NurPhoto | Getty Images

SoftBank founder and CEO Masayoshi Son said he was “stupid” in the company’s multi-billion dollar investment in WeWork in a presentation of the results on Monday.

The comments come as SoftBank gave WeWork a valuation of $ 2.9 billion as of March 31 based on a discounted cash flow method, compared to $ 7.3 billion as of December 31, 2019 following his failure to go public. SoftBank has invested $ 18.5 billion in the company, according to a comments released in October by the president of WeWork. WeWork’s private valuation reached $ 47 billion before its failed IPO last year.

WeWork was not immediately available for comment.

SoftBank had long been hailed for its astute and splashy investments. The company built its name on a massively successful bet on the Chinese technology giant Alibaba. But SoftBank’s reputation started to fly last year when two of its Vision Fund holding companies, Uber and WeWork, revealed massive losses in their deposits to make them public. WeWork’s attempt to go public ultimately failed when the company withdrew its IPO filings following persistent criticism of its financial results and its unusual corporate governance structure.

SoftBank’s $ 2 billion financing round in January 2019 valued WeWork at $ 47 billion before its public offering. Before the IPO was filed, the company had to seek a valuation of up to $ 100 billion. This number slowly declined when investors and analysts delved into its finances.

WeWork’s business could suffer even greater losses now that the coronavirus pandemic has made co-working a potentially dangerous activity. Since many workers are adjusting to their home office, some companies are reconsidering their office space needs.

The Vision Fund recorded $ 18 billion in losses, compared to $ 13 billion in total annual losses for SoftBank Group as a whole. The $ 100 billion fund was created to make big bets on businesses and inject money into them. Of the 88 companies in which the Vision Fund has invested, Son predicted on Monday that fifteen of these companies would succeed, while 15 could go bankrupt in the middle of the pandemic.

Son announced on Monday that Alibaba founder Jack Ma will also be leaving SoftBank’s board effective June 25.

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