SoftBank empire shakes

 SoftBank empire shakes

Plunging profits, wobbly shares and the departure of a key executive are casting a shadow over the SoftBank empire.

Over the past decade, SoftBank and founder Masayoshi Son have garnered global attention with their investments and startups. Essentially, this empire has contributed to reshaping the way startups raise capital. But now, the bad news is piling up.

This week, SoftBank's plan to sell Arm, a $40 billion chip design company, to Nvidia, failed because of regulatory obstacles. Shares in several major tech companies in which SoftBank owns shares, from Chinese internet giant Alibaba to food delivery service DoorDash, tumbled amid a sell-off in high-growth tech stocks. more than. And one of Son's key deputies, Marcelo Claure, left the company in January after a bitter dispute over pay.

Mr. Masayoshi Son and Mr. Marcelo Claure in Idaho in 2018. Photo: Bloomberg

Masayoshi Son and Marcelo Claure in Idaho 2018. Photo: Bloomberg

The decline in SoftBank's business was reflected in its latest financial report. The company said fourth-quarter earnings fell 97 percent from the same period in 2020, even though it managed to make $251 million in profit. Shares of SoftBank have remained relatively flat this week but have more than halved in the past 12 months, as investors grow increasingly wary of SoftBank's big bets that have yet to come to fruition.

Founder and CEO Masayoshi Son acknowledged the company's difficulties, especially when it comes to holding technology stocks. "The storm isn't over yet, but it's getting stronger," he said. Still, he remains upbeat about the company's prospects, saying that the latest investments have put SoftBank at the heart of the artificial intelligence revolution.

Pierre Ferragu, an analyst at New Street Research, said SoftBank's performance reflects the company's transformation over the years, from an operator of companies mainly in the telecommunications sector, to an investor. invest in so-called "disruptive technology companies".

Founded in 1981, SoftBank is one of the largest funders of startups in the US and globally. After going through the boom and busts of the dot-com bubble of the 1990s, Son withdrew almost entirely from the US market, until the 2010s.

In 2012, he re-entered the US with the purchase of a $117 million home in Woodside, California. This is one of the most expensive homes in Silicon Valley. He then bought a majority stake in mobile carrier Sprint in 2013 for about $22 billion and appointed Marcelo Claure as CEO. Sprint later merged with T-Mobile.

By 2017, Son had raised $100 billion for the Vision Fund, considered the largest technology fund in the world ever. With nearly half of the money coming from Saudi Arabia, SoftBank is a major investor in high-growth tech companies like Uber, DoorDash and WeWork.

Many of those investments are struggling as investors are selling tech stocks due to various concerns. Shares of Coupang, considered the "Amazon of Korea," fell nearly 40%. Chinese ride-hailing company Didi fell even further, with about 70% - partly due to the country's tightening control of tech giants.

SoftBank owns stakes in both companies, which trade on US exchanges, although Didi plans to move listings to Hong Kong. Meanwhile, DoorDash — one of the best-performing stocks in 2021 — is trading around the IPO price.

The share price of Alibaba, in which Softbank holds the largest stake, has fallen about 60% from its October 2020 high. SoftBank has invested more than $10 billion in WeWork. The company went public last year and is currently valued at less than $6 billion. And after the Arm deal with Nvidia fell apart, SoftBank plans to take the chip design company public.