SoftBank Group sees wider loss of $8.4 billion on WeWork write-down

SoftBank Group Corp. forecast a net loss for the fiscal year ended in March of 900 billion yen ($8.4 billion), revising its prediction from about two weeks earlier largely because of a deterioration in the business of office-sharing start-up WeWork.
 

The Japanese company made the announcement in a statement Thursday, citing more than 1 trillion yen of non-operating losses from investments held outside of its $100 billion Vision Fund. It had previously said its net loss would total about 750 billion because of writedowns in the value of investments both inside and outside the Vision Fund.
 

Founder Masayoshi Son has been struggling with the impact of the coronavirus on the portfolio of start-ups he has backed in recent years, from WeWork to Uber Technologies.
 

Companies such as Brandless have shut down, while others like Zume Pizza have laid off workers and revised business plans. Satellite operator OneWeb filed for bankruptcy last month.

Son bet heavily on the so-called sharing economy, in which start-ups help people split the use of cars, offices and homes.

Those businesses have been hammered by the pandemic that has discouraged much direct human interaction.
 

SoftBank is scheduled to report final earnings for the fiscal year on May 18. SoftBank shares rose 2.9 per cent in Tokyo trading, in line with the Japanese stock market.
 

“Son is getting the bad news out there, and the market seems to approve,” said Justin Tang, head of Asian research at United First Partners. “Everyone is looking forward to a lifting of lockdowns and easing back to normality. It also helps that SoftBank is out there buying its own shares.”

SoftBank last month boosted the size of a planned share repurchase to 2.5 trillion yen. That has lifted shares that had fallen about 50% from their peak earlier in the year.
 

Writedowns related to its WeWork investment, loan commitment and financial guarantee contract accounted for 700 billion yen of non-operating losses, SoftBank said in the statement. The company has kept its full-year outlook for a 1.35 trillion yen operating loss unchanged.
 

“The impression is that they are being more aggressive in including WeWork-related losses,” said Shinji Moriyuki, an analyst at SBI Securities. “That should help reduce risk further down the road.”
 

Last year, after WeWork’s effort to go public fell apart, SoftBank stepped in to organize a $9.5 billion bailout and put its own chief operating officer, Marcelo Claure, in charge of turning around the business. Earlier this year, the Japanese company scrapped one part of the agreement -- to buy $3 billion of shares from existing shareholders, including former Chief Executive Officer Adam Neumann.

Under SoftBank control, WeWork has been offering some tenants discounts to minimize cancellations following government-mandated coronavirus quarantines, which have forced non-essential employees globally to work from home.

The New York-based company also hasn’t paid April rent for some locations and is approaching landlords regarding rent abatements, revenue-sharing agreements and other lease amendments as it seeks to trim liabilities, people with knowledge of the matter have said.
 

Son’s investments in hotel-booking service Oyo Hotels & Homes and Uber, among the biggest in his portfolio, have also fared poorly, swelling losses in the Vision Fund. It probably wrote down about 1 trillion yen in assets in the March quarter, based on its earlier earnings reports. SoftBank didn’t detail all the startups that took hits.

Oyo, in which SoftBank invested about $1.5 billion, earlier this month furloughed employees in countries outside its home market of India as it struggles to survive the virus. Uber’s shares are trading about 30% below its IPO price.
 

“The bad news seems to be out for now,” said Tang of United First Partners. “But you never know how many skeletons there are in the closet.”