SoftBank group to abandon $3 billion deal for additional WeWork shares

Japan's SoftBank Group Corp will not complete a $3 billion (2.42 billion pounds) tender offer for additional WeWork shares agreed last year with its shareholders, a special committee of the US-based shared-office operator's board said on Wednesday.

"The Special Committee of the Board of Directors of WeWork has been advised by SoftBank, the controlling shareholder of WeWork, that it will not consummate the tender offer which it agreed to in October of 2019," it said in a statement, adding it was "disappointed" by the development.

The US-based company's committee said it will evaluate all its legal options, including litigation and remained committed to reaching a solution.

A SoftBank spokeswoman declined to comment.

Reuters had reported last month that SoftBank was considering pulling out of the $3 billion bid to buy additional shares in WeWork, as it felt the US firm had not met the conditions for the deal. The special committee of WeWork's board later said it was preparing for a fight against the Japanese company.

Softbank plans $41-billion asset sale to expand buyback, cut debt

Masayoshi Son is making his biggest play yet to silence doubters. On Monday, the Japanese billionaire unveiled an unprecedented $41 billion plan to sell off assets and shore up SoftBank Group Corp.’s crumbling market value in the face of the coronavirus pandemic.

SoftBank aims to sell assets to raise as much as 4.5 trillion yen ($41 billion) over the coming year to buy back stock and slash debt — an amount equivalent to almost its entire market value last week. The scale of the endeavor surprised investors, sending the Japanese firm’s stock up 19 per cent. Yet that’s a fraction the capitalisation the investment house has lost since its 2020 peak, underscoring persistent concerns that tumbling technology sector valuations will damage Son’s debt-laden company.

The Japanese conglomerate, which also operates the $100 billion Vision Fund, is considered especially vulnerable to economic shocks given its enormous debt load and ties to unprofitable startups across the world. After Monday’s rally, it’s still down more than 40 per cent from this year’s peak in February.

The coronavirus-triggered rout has also spread to credit markets and sparked a surge in the cost of insuring debt against default — including that of SoftBank, whose credit-default swaps touched their highest level in about a decade.

SoftBank Group seeks to raise additional $10 billion for Vision Fund

SoftBank Group is seeking to raise an additional $10 billion so its first Vision Fund can support portfolio companies battered amid the coronavirus pandemic, according to people with knowledge of the matter.

SoftBank is in talks with outside investors to provide $5 billion, which will be matched by a $5 billion contribution from the Japanese conglomerate, said the people, who requested anonymity because the talks are private.

To be sure, SoftBank may be unable to secure sufficient commitments from investors, in part because West Asian sovereign wealth funds have been rocked by the steep decline in the price of oil.

The Vision Fund — which counts Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment as its biggest backers — had spent $80.5 billion of its $98.6 billion total as of December 31, according to filings.

The fund plans to reserve some of the remaining cash to pay back a coupon attached to the Saudi investment, said some of the people. The new capital would be used to support struggling portfolio companies and to fund opportunistic acquisitions of smaller rivals whose valuations have also been battered, some of the people said.

SoftBank is also reviewing the 88 companies in the first Vision Fund as well as ones in its nascent successor, Vision Fund 2, to ascertain their viability amid the pandemic, some of the people said. Some of these companies may not have sufficient cash on hand to survive for more than a year, one of the people added.

Representatives for SoftBank and SoftBank Investment Advisers, the entity that manages the Vision Fund, declined to comment.

Already, some of the fund’s largest investments have taken a hit. Uber Technologies shares have more than halved in the past month, in part because its ride-sharing service Uber Pool has been banned in certain geographies.

Some of the other closely held companies including food delivery companies DoorDash are poised to be beneficiaries as consumers around the world observe “shelter in place” orders and other mandated quarantining.

After WeWork, SoftBank Group's start-up Bookkeeping draws scrutiny

In early 2018, the founders of Chinese artificial intelligence startup SenseTime Group flew to Tokyo to see billionaire investor Masayoshi Son. As they entered the offices, Chief Executive Officer Xu Li was hoping to persuade the head of SoftBank Group to invest $200 million in his three-year-old start-up.

A third of the way into the presentation, Son interrupted to say he wanted to put in $1 billion. A few minutes later, Son suggested $2 billion. Turning to the roomful of SoftBank managers, Son said this was the kind of AI company he’d been looking for.

“Why are you only telling me about them now?’’ he asked, according to one person in the room.

In the end, SoftBank invested $1.2 billion, helping to transform SenseTime into the world’s most valuable AI startup. The young company’s valuation hit $7.5 billion this year.

That investment model is now under fire after Son, 62, boosted the equity in office-sharing startup WeWork only to see it plummet as investors balked at enormous losses and troublesome governance.

Today’s accounting rules may be ill-suited to an era of unprecedented speculation on unicorns. Under the International Financial Reporting Standards (IFRS) that SoftBank uses, companies have wide latitude to determine how much they think portfolio companies are worth — and therefore how much profit they report to investors. It’s unclear whether any company has tried to determine paper profits for tech start-ups on the scale SoftBank is now using.

“I don’t believe we’ve ever seen an attempt to record this magnitude of income with respect to unquoted equity investments,’’ said Robert Willens, a tax expert in New York.

Son’s bookkeeping has allowed him to claim his average internal rate of return far outpaces those of other investors. This month, as SoftBank took a hit from WeWork, Son defended his investment approach. “There are 5,000 venture capitals globally and average IRR is 13 per cent,’’ he said. “Our return is about twice as big as this.’’