SoftBank’s House of Cards Begins to Fold – GuruFocus.com

House of Cards
SoftBank Group Corp. (TSE:9984) has had a rough time in recent months. The problems besetting the telecom giant have little to do with its core business, however. Rather, they concern its Vision Fund. The brainchild of SoftBank CEO Masayoshi Son, the Vision Fund managed to raise - and spend - a staggering $100 billion on a host of venture capital investments. Son clearly cannot be faulted for a lack of ambition. However, an increasing number of commentators and analysts are calling his grandiose vision into question. Looks good on paper Son has boasted at length about the Vision Fund’s success, focusing on the growth in the valuations of many of its portfolio companies. .


However, these are not real gains at all. Until the Vision Fund exits a position, either through private sale or selling stock post-initial public offering, any apparent gain is just a paper return. WeWork (officially the We Co.) offers a major, and ultimately highly embarrassing, case study in the difference between paper returns and real returns. Beginning in 2015, Son invested billions of dollars of the Vision Fund’s and SoftBank’s money into WeWork over a succession of funding rounds. Between 2015 and January 2019, WeWork’s valuation rose from a lofty $10 billion to an astonishing $47 billion. On paper, anyway. Paper burns fast As it turned out, WeWork was not worth $47 billion, according to the public market. When WeWork attempted to go public in September, its underwriters found few takers, even after slashing its proposed valuation dramatically. Ultimately, WeWork shelved its IPO plans and canned its mercurial CEO. .

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