Changing from the highest-flying conglomerate and most famous capital vehicle to troubled icons of misplaced exuberance, it’s tough to be SoftBank and its Vision Fund today. Despite the occasional good story, it’s been a tough run for the pair.
But lost in the continuous drip of bad news concerning the Japanese firm and its globally backed, gravity-bending fund is the scale of its myriad problems. When taken into account as a group, however, it’s easier to see how many things have go south in rapid succession. So let’s do that.
What follows is a semi-comprehensive list of what’s gone wrong for SoftBank and the Vision Fund recently, starting in the second quarter of last year. You could go back further, but by my estimation, we’re picking up when things began to go sideways for a number of Vision Fund bets at once.
May, 2019: Uber’s IPO disappoints.Uber’s IPO did not go well. After setting an initial $44 to $50 per-share IPO price range, the company failed to boost the interval, instead pricing at $45 per share. That valued the company at $75.46 billion (undiluted), far under what the company had hoped and bankers had intimated it might be worth. Uber then opened down, and is worth just $31.95 per share today, or about $54.5 billion. SoftBank had invested in the company at both $48 billion and $70 billion.
June, 2019: New CEO at Brandless . Another huge bet by SoftBank, Brandless, got a new CEO after losing its preceding chief executive in March due to “tensions with SoftBank.” That long of a CEO gap and the implied executive turmoil wasn’t great news for the company that SoftBank had purchased 40% of for $240 million.
August-October, 2019: WeWork files, falls apart. WeWork fell apart during the third and fourth quarters of 2019. The company’s IPO filing was a hot mess, its management conflicted, its investors oddly passive until the car was out past the cliff and over the water, and the real estate business was overvalued, to boot. It also lost a lot of money. After pulling the IPO and taking a huge loss, WeWork bailed out its former star investment and is working to save it.
September: Compass loses several executives.Compass, another SoftBank-backed startup that had raised more than $1 billion, lost a number of executives that Crunchbase News summarized as follows: “Compass Execs Leave In Another SoftBank-Fueled Real Estate Exodus.”
December, 2019: Layoffs at Katerra. There were layoffs at SoftBank-backed, modular construction startup Katerra a few times during 2019 it seems, but the one we recalled best was the decision to cut 200 jobs and shutter a factory. That happened in December.
December, 2019: OneConnect IPO goes poorly.OneConnect, a SoftBank-backed, China-based company that provides tech to banks, priced its IPO at $10 per share in December, under the $12 to $14 per share range it had hoped for. The company went public worth $3.7 to $3.8 billion, depending on your sums. Both figures were drastically under the Vision Fund’s $7.45 billion post-money valuation that was affixed during a huge private investment. The value of the company has risen since, however, to just over $12 per share.
December, 2019: SoftBank gives up on Wag. SoftBank gives up on Wag, selling its stake back to the company at a loss.
Earlier on and January, 2019: Problems at OYO. It’s hard to draw a start and end to OYO’s problems. You could point to the odd banking behind its latest funding round, which raised eyebrows. Or this from October. But it seems that lately things have been even more worrisome. A New York Times piece published at the start of the year noted that “at least part of Oyo’s rise in India was built on practices that raise questions about the health of its business.” SoftBank is a heavy backer of Oyo.
December, 2019: Brandless revenue down by half. The Wall Street Journal reports that Brandless’s “sales volume as of August had fallen by about half from a year earlier.”
January, 2019: Knives out for Uber CEO. A piece in The Information makes it clear that some folks historically associated with Uber are not pleased with its CEO Dara Khosrowshahi. The company’s share price remains depressed and the company’s unprofitability appears stickier than some anticipated. Including the CEO.
January, 2019: Layoffs at Zume Pizza. This was not a surprise. But it was sad all the same (layoffs impact working people who have bills to pay; fret not for the capital class). Zume intends to shed 80% of its staff, despite having raised $375 million from the Vision Fund. Perhaps robotic pizza cars, or whatever their last idea was, were a bit far off.
January, 2019: The Vision Fund dinged for breaking term sheets. Finally, Axios recently reported that the Vision Fund was breaking term sheets with founders, a big no-no in venture. This led to public shaming by other venture players, an almost unthinkable occurrence back when the Vision Fund was hot — and feared.
And that’s just what I recalled this morning. I’m sure there are other, recent examples of issues with SoftBank and Vision Fund investments.
Will there be a Vision Fund 2 as it was originally detailed? If not, who is going to keep the Vision Fund’s unicorns afloat? Is there enough capital in the market to do so, without a Vision Fund 2?