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Softbank Vision Fund Takes A Hit

by Alan Daniel
Softbank and investments

Softbank is Humbled in Recent Downturn

While Softbank is staying afloat and cleaning up its balance sheet its Vision Fund investments are not doing so great. The Japanese conglomerate let OneWeb go into bankruptcy and then rescinded a recent offer on WeWork.

What’s even worse is that the founder of Softbank thinks that more than 12 out of its more than 50 investments in the Vision Fund portfolio are headed down the path of bankruptcy. Startups going under are not a new trend. It happens. It can accelerate even further if your startup is pursuing some ambitious money burning mission. Masa of Softbank invested in a wide variety of these high flying mission oriented companies. Some of which have turned out well and others which have not.

This is a problem for the entity from a perception and investing standpoint but the firm is still staying transparent through this general economic downturn. Things started turning sour for the Softbank VF starting mid 2019 but everything accelerated with COVID-19 taking over the world. Softbank has seen the rise of two activist shareholders who think that the stock is extremely undervalued and might be a bit more conservative moving forward.

We see that with its recent actions.

Since the WeWork debacle Softbank has started to clean up its balance sheet a little more. Further, the Japanese telecom stated it would sell a portion of some its stakes in assets to raise cash and allay debt concerns. It also announced that it would conduct a share buyback showing that it is aligned with its shareholders. But remember that this is still Softbank and it has not stopped investing in the future.

Softbank Deals Still Going

The Japanese giant saw the merger between T-Mobile and Sprint take place, bringing home a much needed win in that segment of industry. Second, it also saw saw the approval of Yahoo Japan and the messaging app LINE. These recent deals shows that the firm is seeing consolidation in several segments and creating value. Next, Softbank will be committing $48 million to a PetLove, a Brazilian pet products company. This may turn out to be another great investment as the pet market in Brazil is heating up and growing as the country gains more wealth.

But there’s also a simple lesson to glean from the recent pandemic. It pays to have a strong foundation, skills, and to be robust overall. For instance, in Softbanks’ case, it is a telecom company that is slowly morphing into an investing company. The firm has assets, has stable cashflows and has investments in segments that are more mature. They invest in high growth companies while having a strong foundation. This lesson is applicable to those who want to join startups.

Lessons in the COVID-19 Storm

The recent economic pause must factor into general employment decision making as well. Those interested in compelling and high flying startups will likely think twice about which company they join.

Startup employees are taking more risk in startupland as most startups do go to startup must make sure that they are working with startups that are likely to succeed and sustain through downturns as well. A risk on mindset is necessary for innovation and growth.

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