After WeWork’s bankruptcy, its largest investor SoftBank reported a $6.2 billion loss

The Japanese multinational investment company SoftBank reported a net loss of 931 billion yen, or $6.2 billion, in its second quarter, thereby worsening the situation for shareholders and founder Masayoshi Son after WeWork, the company in which SoftBank invested, filed for bankruptcy this week.

This marks the fourth consecutive quarter that the Japanese conglomerate has ended with a loss, as gains from the initial public offering of chip designer Arm failed to mitigate issues arising from a weak yen and other market factors. Analysts had expected a net profit of 180.8 billion yen, but this did not materialize.

– It was a disappointing quarter – concluded Kirk Boodry, SoftBank’s analyst at Astris Advisory in Tokyo, highlighting a $2.9 billion write-off in the private portfolio of the Vision Fund.

Specifically, the company stated that Vision Fund 1 achieved a profit of $2.5 billion after selling its stake in Arm to its parent SoftBank for $4 billion, but Vision Fund 2 suffered a loss of $2.1 billion, including investments in WeWork. SoftBank’s LatAm funds also incurred a loss of $100 million. The public portfolio of the Vision funds thus lost value for the first time in a year.

Running after artificial intelligence

The loss in the second quarter comes as SoftBank’s founder and CEO Son seeks business opportunities in the field of artificial intelligence. The CEO told shareholders in June that the company is embarking on a ‘counteroffensive’ and is looking for new opportunities.

Boodry stated that he still expects SoftBank to ‘move away from the defensive approach of last year and accelerate the pace of investments’, although in the second quarter ‘investments were consecutively reduced’.

The conglomerate was forced to pay $1.5 billion to Goldman Sachs and other lenders just days before WeWork filed for bankruptcy, increasing the total amount that SoftBank has dedicated to the failed unicorn to over $16 billion since its initial investment in 2017.

This week, SoftBank also announced that it suffered a loss of 21.6 billion yen due to WeWork’s bankruptcy.

Yoshimitsu Goto, SoftBank’s CFO, stated during the earnings announcement that what happened with WeWork is ‘regrettable’ and that the group needs to ‘accept reality and learn lessons from it’.

Recall that WeWork, a provider of coworking spaces and once a major unicorn valued at $47 billion, filed for bankruptcy. The company was founded in 2010 by Adam Neumann, who once symbolized how charismatic entrepreneurs could choose a seemingly stable sector, apply the shine of technology, and attract capital to achieve unicorn status. However, as losses grew due to rising interest rates and increasing costs in the real estate sector over the past two years, the company became one of the worst excesses of the cheap money era.