|Bid||3,810.00 x 0|
|Ask||3,810.00 x 0|
|Day's Range||3,664.00 - 3,887.00|
|52 Week Range||2,609.50 - 6,045.00|
|Beta (5Y Monthly)||1.37|
|PE Ratio (TTM)||28.19|
|Earnings Date||May 07, 2020 - May 11, 2020|
|Forward Dividend & Yield||44.00 (1.19%)|
|Ex-Dividend Date||Mar. 30, 2020|
|1y Target Est||13,753.00|
SoftBank Group Corp said on Wednesday it has appointed former Goldman Sachs banker Taiichi Hoshino as head of a new investment planning department, as the group increases oversight of its tech bets battered by volatile markets. Souring bets across its portfolio have left SoftBank selling down prime assets and holding back from making new investments. Hoshino is expected to bolster the investment team at a time when CEO Masayoshi Son has received criticism for his top-down investing approach.
(Bloomberg) -- New Residential Investment Corp., a real estate investment trust focused on housing, is selling a portfolio of debt with a face value of $6 billion, according to people with knowledge of the matter.The REIT, managed by an affiliate of Fortress Investment Group LLC, has been selling the non-agency debt over the past week to a range of institutional investors, with the transactions expected to be finalized Tuesday, said one of the people, who asked not to be identified because the deals are private. A New Residential representative declined to comment.The loans were sold at a discount, said one of the people. The exact pricing couldn’t immediately be learned. New Residential, which has seen its stock sink more than 65% this year, has a market value of about $2.2 billion. Earlier Tuesday, the New York-based REIT said it would cut its quarterly dividend 90% to preserve liquidity.The U.S. mortgage market has been roiled by the coronavirus pandemic, leading firms to quickly unload billions of dollars in mortgage-backed securities to meet investor redemptions and manage liquidity issues. While the Federal Reserve is buying up mortgage debt, the effort is focused on securities consisting of so-called agency loans that were created with help from the federal government -- different from New Residential’s non-agency debt.“Conditions created by the Covid-19 pandemic have greatly impacted the mortgage REIT industry,” Chief Executive Officer Michael Nierenberg said in a statement. “Market dislocations have put significant downward pressure on asset values. In light of these events, we have made a number of decisions to de-risk, increase liquidity and protect our book value. We continue to focus on growing liquidity as we navigate the market during this time.”The company said its book value has declined about 25% to 30% since the end of last year.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- China’s car trading platform Chehaoduo Group, backed by SoftBank Vision Fund, is exploring options to raise several hundred million dollars after auto sales took a hit in the coronavirus outbreak, according to people familiar with the matter.The company is studying possibilities including equity fundraising and asset-backed securities issuance, said the people, who asked not to be identified as the discussions are private. The car platform is also considering seeking support from local government, one of the people said.Chehaodou, which means “a lot of cars” in Chinese, is arranging virtual meetings with potential investors, the people said. Deliberations are ongoing and the company hasn’t made any final decisions on the fundraising plans, they said.A funding round could come after auto sales in China slumped on the coronavirus pandemic, although potential buyers are gradually returning to showrooms as the country loosens travel restrictions and rolls out subsidies. Chehaoduo is looking for fresh capital to bankroll its expansion in the car services market, one of the people said.Chehaoduo has worked with local governments before. In 2018, it received 3 billion yuan ($423 million) in funding from the city government of Kunshan, where it set up the headquarters for one of its units, local media reported at the time.Backed by 58.com Inc., which operates China’s largest classified online marketplace, Chehaoduo is also weighing an initial public offering in late 2020, the people said. Hong Kong or the U.S. are among the potential listing venues, one of them said.Chehaoduo said in a statement that it’s in the process of fundraising, declining to comment further.Chehaoduo runs online automotive retail businesses including used car trading platform Guazi.com, which was launched in 2015, and Maodou.com, an online new car marketplace set up in 2017, 58.com’s 2018 annual report said. They also provide post-sales maintenance services, financing and insurance solutions in over 200 cities across China, said the report.The company announced in October 2018 on its official WeChat account that its valuation had reached $6.6 billion after completing a so-called C plus round of capital raising. Five months later, the firm said it had raised another $1.5 billion from SoftBank Vision Fund, valuing it at more than $9 billion.The platform counts an array of private equity firms as its investors including Capital Today China, Yunfeng Capital, FountainVest Partners and IDG Capital. 58.com, which has long been one of Chehaoduo’s key backers, said in its 2018 annual report that it was in a process to sell down its holding in the company to roughly 8% from 19.1%.58.com plans to acquire the business-to-business online second-hand car auction unit of Chehaoduo’s major market rival Uxin Ltd. for $105 million, according to an announcement by Uxin on March 24.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- If exchange-traded funds are the fast food of investing, then private equity is the private kitchen. As the world spirals into a recession and the coronavirus pandemic batters your retirement accounts, wealthy investors who bought into assets from unicorns to paintings can hide in an elite bubble that isn’t subject to brutal mark-to-market fair value writedowns.But once in a while, a high-profile unicorn hunter can blow the lid off that opaque world, giving us a glimpse of just how much pain private equity is in. Sometimes, private kitchens churn out terrible dishes, too.Investors are fleeing as SoftBank Group Corp., which runs the $100 billion Vision Fund, scrambles to shore up its balance sheet, as well as those of its portfolio companies. SoftBank gives a good feel for the landscape, because it behaves more like a private equity firm than an angel investor: Its capital is really debt, and it likes to invest in rivals and force them to merge. SoftBank is seeking to raise billions to support its unicorns battered by the coronavirus outbreak, saving those that still show potential and cutting loose the ones that bleed too much cash. On the one hand, it’s in talks to lead a fresh $100 million funding round for Plenty Inc., perhaps because the indoor farming startup can benefit from panic buying of fresh produce. On the other, OneWeb, a satellite operator, has filed for bankruptcy.SoftBank’s desperate scramble must resonate with many private equity firms out there, whose portfolio companies will inevitably need their patrons’ help. By early March, industry titans Blackstone Group Inc. and Carlyle Group Inc. already urged businesses they’ve invested in to do whatever it takes to stave off a credit crunch. But with blue chips drawing at least $124 billion from their credit lines in the first three weeks of March, and dollar funding this tight, will lenders have the bandwidth to aid smaller companies? Banks certainly have much bigger deals to digest: They’ll need to come up with $23 billion of loans soon for T-Mobile USA Inc. to close its merger with Sprint Corp.Granted, for private equity firms, cash levels are at a record high. Last year, capital committed to this sector grew 20% to $1.3 trillion, estimates Pitchbook, a Morningstar company. But instead of buying new assets, firms may have to earmark a good chunk of that money for existing investments, either recapitalizing — like what Softbank has done for basket case WeWork — or leading unplanned funding rounds.Meanwhile, making capital calls to investors can’t be much fun right now. Even the best of them — pension funds and sovereign wealth funds — are dealing with their own crises and may not want to pick up your calls right away, especially if it means selling other assets at deep discounts just to come up with your money. Plus, we now all have the convenient excuse of working from home: Some of us are hiding in the woods (or the Hamptons), away from the raging virus, and may not have good cellphone reception.Just look at SoftBank. As of December, only about 75% of the Vision Fund’s committed capital is with the fund, and the company still needs to call $17.5 billion from third-party investors, its latest filing shows. Since then, Saudi Arabia, a major investor, has started an oil price war, further diminishing its fiscal power. So forget about Vision Fund 2; founder Masayoshi Son needs to fill up 1.0 first. In the last decade, private equity firms piled vast amount of debt onto their portfolio companies to boost returns. More than 75% of deals in the sector included debt multiples greater than six times Ebitda in 2019, compared with 25% after the collapse of Lehman Brothers Holdings Inc., according to Pitchbook. When liquidity recedes, these investments are in trouble.To make matters worse, portfolio companies’ ability to service debt is even worse than it looks on paper, because Wall Street lawyers and bankers often juice earnings to make purchase prices look more reasonable, and so underwriters can originate more loans and earn more fees. In 2016, businesses involved in a merger or leveraged buyout missed their own earnings projections by an average of 35% in the first year after the deal, Bloomberg Businessweek reported in December.So imagine the coronavirus world, where any prior earnings projections feel as outdated as “Sex and the City” stars prancing around Central Park in Manolo Blahniks. Just as social distancing is becoming the norm, so too will corporate defaults. The global rate could climb to 16.1% if the pandemic brings economic conditions that mirror the Great Recession, Moody’s Investors Services warned last week.In private equity, fancy terms like total addressable market or adjusted Ebitda are often used to make a company look more profitable than it is. But the coronavirus is unraveling all that. Just like the rest of world, private markets are also suffering. Ray Dalio’s “cash is trash” motto is so yesterday. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Kyash Inc., a Tokyo-based digital banking startup, has raised $45 million from investors at a time the coronavirus outbreak threatens to dry up venture capital funding.The Series C round was co-led by Greenspring Associates Inc. and Goodwater Capital, bringing the total raised by the company to date to $73 million, Kyash Chief Executive Officer Shinichi Takatori said in an interview. Kyash, which also counts Jafco Co. and Japanese banks Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. among its investors, will use the funds to expand its digital banking offerings.Kyash has developed a payment platform that links directly to Visa Inc.’s system, allowing it to issue cards to consumers as well as tailor services to businesses. The company is part of the growing universe of so-called challenger banks, a group of mostly online operators that aim to use technology to reduce costs and lure customers away from established competitors. The cohort includes Monzo, Starling Bank and Revolut Ltd. in Europe and Chime in the U.S. SoftBank Group Corp.’s Vision Fund last year invested $800 million into financing company Greensill.“It is a vote of confidence in our business, especially at a time like this,” Takatori said. “Our investors believe we can be the leading challenger bank in Japan.”The 34-year-old CEO founded the company five years ago after stints in banking and consulting. Kyash launched a peer-to-peer money transfer app in 2017 and added a Visa-linked payment wallet a year later. It declined to disclose user numbers and other figures and only said its systems currently process about one transaction per second.In Japan, Kyash is up against heavy competition. Mercari Inc., whose mobile payment service counts more than 6 million users in the country, this year acquired pay service Origami Inc., while e-commerce giant Rakuten Inc. runs its own bank, has a credit card with more than 19 million customers and is launching a mobile network. SoftBank is in the process of creating a domestic giant by combining its Yahoo Japan internet business with Line Corp., whose app is used by about half of Japan’s population to send instant messages every day. Both companies compete in mobile payments.While Takatori acknowledges that not having a large, existing user base is a challenge, he says his company enjoys a light cost structure because it was built from scratch. The app also reflects transactions in real time, without delays typical of cards that involve processing by third parties.“Unlike some of our competitors, we are not doing this to funnel people into some other service or try to sell them a mobile plan,” Takatori said. “This is our main business.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- SoftBank Group Corp. fell as much as 10% after a satellite operator it invested in filed for bankruptcy, ceding some gains from an unprecedented plan to sell assets and buy back shares.OneWeb made the filing late Friday U.S. time after raising about $3.3 billion in debt and equity financing from shareholders including SoftBank, Airbus SE and Qualcomm Inc. since its inception. At least $1 billion of that came from SoftBank, which said it first invested in December 2016 and declined to give a total amount.It is the latest blow to SoftBank founder Masayoshi Son, who last week unveiled a plan to raise $41 billion to buy back shares and slash debt. The announcement sent the shares soaring more than 50% in just a few days. The rally was interrupted when Moody’s Corp. cut its debt rating by two notches, saying the Japanese investment firm’s plan to sell off assets during a market downturn threatened its total value. SoftBank’s shares traded 6.7% lower on Monday morning in Tokyo.Son had often pointed to OneWeb as one of the cornerstones of an investment portfolio that ranges from ride sharing, co-working and robotics to agriculture, cancer detection and autonomous driving. The startup was working on providing affordable high-speed access anywhere in the world and targeting 1 billion subscribers by 2025. Son has painted a picture of a future where satellite networks cover every inch of the Earth and a trillion devices connected to the internet disgorge data into the cloud where it is analyzed by artificial intelligence.OneWeb listed liabilities and assets of more than $1 billion each in its Chapter 11 petition in U.S. Bankruptcy Court in White Plains, New York. The company had been in advanced discussions earlier in the year for a fresh investment, it said in a statement. But the discussions fell apart after the coronavirus pandemic sent markets into a tailspin, it said.The company had been mulling a Chapter 11 filing even as it continued to review possible out-of-court alternatives, people with knowledge of the matter told Bloomberg News on March 19.The satellite operator said it will pursue a sale process during the court reorganization and is in talks for so-called debtor-in-possession financing that would allow the company to fund its obligations during the proceedings.OneWeb makes low-orbit satellites that provide high-speed communications. It faces high-profile competition, including from Elon Musk’s SpaceX Starlink project and Jeff Bezos’s Amazon-linked Project Kuiper effort, while incumbents in the space include Inmarsat, Intelsat SA and Eutelsat Communications SA.At the time of its filing, OneWeb owed $238 million to Arianespace, its satellite launch operator, according to the court document. Arianespace, headquartered near Paris, describes itself on its website as the world’s first commercial space transportation company.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Indoor farming startup Plenty Inc. is in talks to raise $100 million or more in a fresh round of funding, according to people familiar with the matter.SoftBank’s Vision Fund is in discussions to lead a new fundraising round for Plenty at or below the $1 billion valuation that was ascribed to it in its most recent round, said the people, who requested anonymity because the matter is private. They cautioned that no agreement has been reached, and that one may not be finalized.“Plenty does not comment on financing proposals and has not committed to any new financing rounds,” a spokeswoman for the South San Francisco-based company said in an emailed statement. “We are not in need of new equity financing, and evaluate any proposals opportunistically,” she added.A representative for the Vision Fund didn’t immediately respond to a request for comment.Plenty has raised about $400 million in capital over the past four years, according to PitchBook. In addition to the $100 billion Vision Fund, other backers include Data Collective, DCM, and funds that invest on behalf of Amazon Chief Executive Officer Jeff Bezos and former Google CEO Eric Schmidt.The startup aims to be more efficient than traditional farms, yielding more produce in a given space, while requiring less water.Last fall, Plenty said it intended to expand beyond the Bay Area and had identified Compton, Los Angeles, as the location for its next farm, with building slated to begin in late 2020.SoftBank is seeking $10 billion so its Vision Fund portfolio companies can support portfolio companies battered by the coronavirus pandemic, Bloomberg News reported earlier this month.Some of the Vision Fund’s companies have laid off employees this month including co-working giant WeWork and residential real estate brokerage Compass.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
OneWeb is in negotiations for debtor-in-possession financing, which if acquired and approved by the court will support its ongoing business, the company said in a statement that did not mention how many jobs were being cut. The company also said it had been in talks for funding since the beginning of the year but the process had stalled due to the financial impact of the coronavirus outbreak. "Our current situation is a consequence of the economic impact of the COVID-19 crisis," Chief Executive Officer Adrian Steckel said, referring to the respiratory disease caused by the novel coronavirus that emerged from China late last year.
(Bloomberg) -- In a deal that’s currently at risk of falling apart, a handful of investors would be the main beneficiaries of SoftBank Group Corp.’s plan to buy $3 billion of WeWork stock, according to a person familiar with the matter.As part of the agreement, scheduled to be completed next week, $2.1 billion in proceeds from stock purchases is slated go to five investors, according to the person, who asked not to be identified discussing private information. Benchmark, the venture capital firm that backed WeWork from its earliest days, is seeking to sell up to $600 million worth of shares, said the person, who asked not to be identified discussing private information. That figure puts Benchmark behind only Adam Neumann, WeWork’s co-founder and former chief executive officer, who has the right to sell as much as $970 million in the deal.Representatives for Benchmark and Neumann didn’t immediately respond to requests for comment. WeWork declined to comment.SoftBank, the biggest investor of WeWork parent We Co., has threatened to withdraw from the deal, the proceeds of which would not go to WeWork itself, but rather to its institutional investors and other shareholders. Still, if the transaction falls apart, it will have negative repercussions for the company, which would not receive $1.1 billion in debt from SoftBank.Besides Neumann and Benchmark, other top sellers in the deal include WeWork investor T. Rowe Price Group Inc., former WeWork Chief Financial Officer Ariel Tiger, who served in the Israeli military with Neumann and another venture capital firm, the person said. A spokesman for T. Rowe Price declined to comment. Tiger did not immediately respond to a request for comment.“SoftBank remains fully committed to WeWork’s success as its largest shareholder and is proud of the tremendous progress the company has made over the past six months,” a spokesman for SoftBank said in a statement.SoftBank’s stock buyback was scheduled to close April 1, but the Japanese conglomerate has said that it is not obligated to go through with the purchase. SoftBank has said under the terms of its original agreement, it could withdraw from the offer if certain conditions weren’t met, and that unresolved government investigations into WeWork qualify. Two board members disputed that assertion.SoftBank agreed to the rescue package for WeWork in October, shortly after the company’s plans for an initial public offering dramatically unraveled. SoftBank said it has provided $13.4 billion to WeWork, including $5 billion in working capital since October, and is honoring its obligations as laid out in the agreement.A special committee of WeWork board members has said that it is weighing options including legal action if SoftBank does not follow through with the purchase. That committee has two members: Benchmark’s Bruce Dunlevie and independent director Lew Frankfort. A representative for the committee declined to comment. Other investors slated to sell a large amount of WeWork stock to SoftBank in the deal include JPMorgan Chase & Co., Goldman Sachs Group Inc., Jefferies and Fidelity Investments, according to two people with knowledge of the matter. Spokespeople for JPMorgan and Fidelity declined to comment. Representatives for the other investors did not immediately respond to requests for comment. Less than 10% of the proceeds from the stock buyback would go to WeWork employees, SoftBank has said. Many employees repriced their stock options and thus aren’t part of this stage of the tender offer.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Knotel Inc., a company that manages and rents short-term office space, said Friday it was cutting or furloughing half of its staff, or about 200 workers, in response to the coronavirus.Amol Sarva, Knotel’s chief executive officer, said the company was eliminating the jobs of about 30% of its staff, mostly in the U.S., and putting another 20% on furlough in markets where that is available, mostly in Europe. The New York-based startup operates offices in more than a dozen cities across the U.S., Europe, South America and Asia. It has raised a reported $560 million in venture funding.As the coronavirus wrecks economies across the globe and as companies and governments are requiring workers to stay away from the office, once-flush startups are cutting jobs and downsizing. Knotel and other flexible office space and co-working companies are likely to be hit hard. Customers might default on rent or cancel contracts, and the idea of working near other people may never feel quite the same again. Sarva said Knotel is stopping efforts to acquire new real estate or sign new leases, which led to many of the job eliminations. The focus now is on serving its existing customers, he said. Knotel is also working with local governments to provide office space for relief efforts.Sarva said he hopes the move will help the company be ready for what’s ahead. “It's intended to prepare for the worst case, like a long health crisis, long economic crisis,” he said. The company is revising down its forecasts for 2020, Sarva said, but still expects to be profitable this year.Knotel’s biggest rival, WeWork parent We Co., has been struggling after a failed initial public offering last year that led the company to cut 2,400 jobs in November. WeWork has been facing blowback for continuing to stay open and charge members, especially in areas where governments are requiring residents to shelter in place.WeWork could also face a cash crunch in the near future. More than a quarter of their members are on month-to-month leases and could choose not to renew during the crisis. And its biggest investor SoftBank Group Corp. is threatening to unravel a $3 billion stock buyback scheduled to close next week, which could block WeWork from receiving an additional $1.1 billion in debt it was counting on.(Updates with WeWork context in the last paragraph. In an earlier version of this story the company corrected a previous misstatement about sales. It has stopped real estate deals but continues to sell existing space.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Broadband constellation satellite operator OneWeb will file for bankruptcy protection in the U.S., likely some time Friday, after attempts to secure new funding, including from existing investor SoftBank, fell through, TechCrunch has learned. Update: OneWeb confirmed today's reports in a press release, citing "market turbulence related to the spread of COVID-19" for the failure to raise. "We remain convinced of the social and economic value of our mission to connect everyone everywhere," said CEO Adrian Steckel.
(Bloomberg) -- Masayoshi Son pledged an extra 10.1 million SoftBank Group Corp. shares to lenders in the past two weeks as he unveiled an ambitious plan to overhaul his Japanese conglomerate and silence critics.Son has now committed 227 million SoftBank shares as collateral, worth about $8 billion, according to regulatory filings. That’s about 40% of his 27% stake in the publicly traded conglomerate. The newly pledged shares were worth about $360 million at Friday’s close.The Japanese billionaire has more than tripled the level of pledging since 2013, turning to banks including UBS Group AG, Nomura Holdings Inc., Credit Suisse Group AG and Julius Baer Group Ltd. It’s not uncommon for the ultra-wealthy to borrow against their stock, but Son’s use of the tactic is among the most significant tracked by the Bloomberg Billionaires Index. The amount he’s pledged trails only Larry Ellison, Russia’s Suleiman Kerimov and China’s Qin Yinglin on the ranking of the world’s 500 richest people.Son’s net worth is $12 billion, which excludes the value of the pledged shares. It has fallen $3.6 billion so far this year and has been one of the more volatile fortunes tracked by Bloomberg.SoftBank spokesman Takeaki Nukii declined to comment on Son’s personal finances.SoftBank has been battling on several fronts this year, including facing pressure from Elliott Management Corp., which called for a special committee to review processes at the Vision Fund, the world’s largest single investment pool for tech startups. Son has responded with a plan to sell about $14 billion of shares in Chinese e-commerce leader Alibaba Group Holding Ltd. as part of an effort to raise $41 billion to shore up businesses battered by the coronavirus pandemic. Son moved ahead after he reportedly considered and then abandoned the idea of taking his conglomerate private.SoftBank also lashed out at Moody’s Corp. this week after its debt was downgraded by two notches, accusing the ratings company of “bias” and “creating substantial misunderstanding.”Some other billionaires are scrambling to meet margin calls on their pledged shares. India’s Gautam Adani and his family put up an additional $1.4 billion of shares as collateral on existing debt this month, and wealth managers like UBS and Credit Suisse have asked clients to post additional collateral.(Updates with Moody’s response in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Masayoshi Son has been among the most fervent believers in the sharing economy, investing billions in startups that help people split the use of cars, rooms and offices. But as the coronavirus curtails unnecessary human interaction, it’s hammering such businesses and rattling the foundations of Son’s SoftBank Group Corp.In New York City, the co-working space of SoftBank-backed WeWork stands practically empty as tenants stay home for fear of infection. In Shanghai, drivers for the ride-hailing service Didi Chuxing have seen their pay plummet as customers avoid shared automobiles. In San Francisco, Dara Khosrowshahi, chief executive officer of Uber Technologies Inc., another SoftBank investment, said “I wouldn’t put my kids in an Uber.”Investors are increasingly spooked about the stability of Son’s empire and its $100 billion Vision Fund amid the pandemic. Before this week, SoftBank shares had tumbled about 50% in a single month, including their worst one-day decline since the Japanese billionaire listed his company in 1994. In response, the SoftBank impresario launched one of the most audacious deals of his career: sell part of Alibaba Group Holding Ltd. and other assets to raise $41 billion to buy back shares and slash debt.While that envisioned deal put a floor under the share price, it hasn’t changed the fundamental vulnerability of an edifice built on sharing-economy standouts that’ve been walloped since sheltering in place became the norm. SoftBank gained about 40% since Son revealed that blueprint, which is said to include unloading $14 billion of Alibaba stock for starters. But it remains down about 30% from a February peak. In fact, Moody’s Corp. questioned the wisdom of selling prized assets into a market downturn and pushed SoftBank’s debt deeper into junk territory. SoftBank fired back by accusing Moody’s of bias, but its stock fell 9.4% on Thursday.“Right now, investments sensitive to sharing and the economy are not where you want to be, with the pandemic encouraging a stay-at-home mentality,” said Pelham Smithers, whose London-based firm offers research on Asian technology companies, in a note to clients. Companies such as WeWork, Uber and the hotel-booking Oyo “weren’t profitable when times were (relatively) good, begging the question, what will their economics look like in 2020?”Read more: Masa Son Unveils a $41 Billion Asset Sale to Silence His CriticsDespite the stock bounce, SoftBank’s credit default swaps -- the cost of insuring debt against default -- are still near their highest levels in a decade. The concern isn’t so much that the Japanese giant won’t be able to pay its own debts -- its cash will cover money due for at least the next two years. Rather, investors fret that Son’s 80-plus portfolio companies will struggle in the current environment, triggering negative headlines and massive writedowns.“With the prospect of more good money being sunk into firms like WeWork and Oyo, investors would not have reacted as positively as they did this week,” Amir Anvarzadeh, a market strategist at Asymmetric Advisors Pte. in Singapore, said in a note to clients.Most worrisome for investors, Son -- who saw $70 billion wiped from his net worth in the dot-com crash -- may feel compelled to step in to support some of his startups rather than see them fail. The litany of woes surrounding SoftBank’s highest-profile startups threatens to tarnish Son’s reputation as a tech investor -- one built largely on an early bet on Alibaba before it came to dominate Chinese e-commerce, which he’s struggled to replicate.Last year, after WeWork’s effort to go public fell apart, SoftBank stepped in to organize a $9.5 billion bailout. Son had to choose between financial aid or bankruptcy, at a time when risk aversion is straining global tech investment.“SoftBank frustrated investors already with its assistance to WeWork last year,” said Makoto Kikuchi, chief investment officer at Myojo Asset Management Co. in Tokyo. “SoftBank owns many investments such as tech companies that get hit particularly in this situation.”SoftBank and Vision Fund representatives declined to comment for the story.Read more: SoftBank Blasts Moody’s for ‘Biased’ Ratings DowngradeSon did vow he wouldn’t step in to rescue any more portfolio companies after WeWork and called for more financial discipline. Among SoftBank startups, Brandless Inc. said in February it would close down while satellite operator OneWeb is mulling a possible bankruptcy filing.“It’s unlikely that SoftBank portfolio companies will see any of that money, because the announcement was pretty clear on the purpose of the asset sale,” said Justin Tang at United First Partners. “In fact, it would be an opportune time for SoftBank to get rid of its weaker portfolio companies and stick with the leaders.”On Wednesday, Moody’s said it will watch SoftBank and the extent to which tumbling valuations will hurt its tech-heavy portfolio. Son’s biggest bet to date has been on ride-hailing, with stakes in Uber and the leading companies in China, India and Southeast Asia. The latest to exhibit signs of trouble was European player Getaround, which is now said to be dangerously short of cash and actively seeking a buyer.Beijing-based Didi Chuxing is another prime example of how the virus is walloping these operations. The startup, once tagged at $56 billion, had struggled to justify its valuation even before the latest crisis because of a government crackdown on its services. Ridership tumbled during the outbreak in China and Didi cut driver subsidies.Sheng Gang, a 34-year-old Shanghai resident, said he used to earn a 36 yuan ($5) bonus for every four rides during the morning rush hour; now that’s been lowered to just 6 yuan for every three. He expects his income to drop by about half this month to around 10,000 yuan.“I don’t have a Plan B since I just bought a new car,” Sheng said.Wen Peng, a 35-year-old Hebei native, earned around 6,000 yuan a month as a part-time driver. But when the coronavirus hit, most people chose to stay inside and he couldn’t sustain himself. He quit in February.“People didn’t leave their homes, almost no one wanted rides,” he said. “Many others quit for similar reasons.”A Didi spokeswoman said ridership has rebounded significantly in recent weeks as people went back to work.Read more: WeWork’s New Crisis: ‘Workplaces Will Never Be the Same’WeWork is another question mark: SoftBank has told WeWork shareholders that it could withdraw from the agreement to buy $3 billion of its stock that was part of a bailout deal. WeWork has kept its offices open despite the virus, even while other co-working operators have closed them. That may be because revenue would disappear otherwise, just as SoftBank is trying to engineer a turnaround. WeWork said Thursday it doesn’t expect to hit its 2020 financial targets as it grapples with the outbreak.One executive who usually uses a WeWork office on Park Avenue in New York said hardly anyone shows up anymore. His WeWork representative has stopped coming to the site and works remotely. He figures customers may be canceling their leases or simply not paying, which would leave WeWork on the hook for rent owed to the landlord, Tishman Speyer. “None of us are going to the office,” he said. “But we’ve decided for now to just kick any decisions down the road for six months.”Then there’s Oyo, which is in a particularly tricky spot. The Indian company has been expanding rapidly by guaranteeing a certain amount of revenue to hotels if they sign on as franchisees. But with few travelers anywhere, Oyo has to pay hotels even when their rooms are mostly empty.At the Kawasaki Hotel Park in Japan, more than 400 reservations were canceled for February to April. The result was a drop in revenue of about 25 million yen ($226,000), according to Sanho Miyamoto, the owner.“Overseas customers disappeared and Japanese businessmen halted business trips. I had to ask our employees to take a vacation for a while,“ Miyamoto said. “I am worried whether Oyo can manage because it guarantees the revenue fall for its members.”He wouldn’t comment on arrangements with Oyo. But if the startup paid the entire shortfall, it would lose about $240,000 on a single hotel.Read more: Masayoshi Son’s Other Big Real Estate Bet Has Some Real ProblemThere’s opportunity in the downturn too. SoftBank-backed Slack Technologies Inc., a popular work communications tool among home workers, has surged following lockdowns from New York to California. And after a difficult first year in Japan, Oyo has turned to promising cash for hotels that join its platform as bookings plunged. While the company didn’t say how much it was prepared to spend, that kind of opportunism can only shorten its runway of available cash.Investors fear that companies like Oyo have become too big to fail for SoftBank, Atul Goyal, senior analyst at Jefferies Group, wrote in a report. The WeWork rescue showed that “zero is not a floor” for any SoftBank investment and that Son is willing to throw more good money after bad, he wrote.SoftBank may soon prove Goyal right. The company is seeking to raise an additional $10 billion so its first Vision Fund can support portfolio companies, according to people with knowledge of the matter. And the list of SoftBank portfolio firms that may soon need help also includes gym company Gympass, Getaround and travel startups Klook and GetYourGuide.“These startups are geared for high growth and high cash burn,” Goyal said. “As revenues fall, they will need further infusions of capital to keep the lights on.”Read more: SoftBank Seeks $10 Billion to Support Vision Fund Companies(An earlier version of the story corrected the name of GetYourGuide.)(Updates with WeWork’s warning in the 21st paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- It’s not fun being graded at the best of times, and it’s never pleasant being “downgraded.”Just look at this week’s spat between SoftBank Group Corp. and credit-rating provider Moody’s Corp following a double snip to the technology investor’s credit score. The row lays bare the complicated subjective and quantitative dynamics of judging a company’s credit worthiness. With business facing a mass downward revision, it’s a taste of things to come.The primary justification for Moody’s cut was “the unexpected size and apparent urgency” of a 2 trillion yen ($18 billion) share buyback program announced by SoftBank earlier in the week. That’s a controversial view because the cost of the share purchases would be more than covered by 4.5 trillion yen of planned sales from SoftBank’s investment portfolio. The vast majority of these proceeds would actually be used to cut debt.Markets had thought this was all good. With SoftBank’s shares trading at a big discount to the value of its underlying holdings, the maths of buying its own stock looked attractive. And what’s not to like about debt reduction?But Moody’s was puzzled by the timing. “It is unclear why [SoftBank] is undertaking such a dramatic recapitalization during a time of severe stock and market volatility,” it said, somewhat ominously. It seems the ratings firm doubts the explanation that now is an opportune moment to buy back stock and cut debt as a precaution.Moody's reasoning here is less analytical, and more an instinctive sense of caution.SoftBank’s response was pretty instinctive too. It was absolutely furious, and has requested that Moody’s removes its ratings entirely. The credit assessor’s puzzlement is viewed as plain bias by the downgraded company. SoftBank has accused Moody’s of ignoring the fact that the asset disposals would happen over the course of a year, not in some dramatic firesale now, and the smaller portfolio would still mainly comprise easy-to-sell securities. (Moody’s hasn’t responded to the criticisms).The question remains: what happens if markets and volatility hold at recent levels for a long time? To SoftBank, Moody’s is spreading misunderstanding and deviating from its methodology. But, arguably, the back and forth — available to all to read — has been useful for investors. Yes, Moody’s analysis does appear partly based on a skeptical gut feel. Still, sometimes that’s helpful. Investors can weigh its credibility accordingly and do the same for SoftBank’s fightback.We will see more of this kind of tension. These are difficult times. There were feuds in the post-2000 bear market and the euro zone debt crisis. Even if a downgrade is a response to circumstance, it’s usually received as a humiliation. And it may affect not only the cost of debt, but potentially access to borrowing entirely.The ratings firms were on the back foot during the financial crisis after wrongly assessing subprime structured credit as safe. Tension flared again in 2011 when S&P Global Ratings removed the U.S.’s triple-AAA rating. A political backlash ensued. Weeks later, S&P’s chief executive officer stepped down.The good news is that disagreements provide some comfort that the potential conflicts within the ratings business are manageable. The entity being graded — SoftBank in this case — pays for the privilege, which creates the risk that it gets soft treatment. A better model hasn’t been found yet: If investors paid, ratings might cease to be public and the new paymasters might seek to influence ratings firms instead.As the downgrades start flowing, there will be more controversial justifications. Companies may have underappreciated the extent to which ratings are opinions. Their formulation is more like diagnosis than entering inputs into a formula to derive an output. As with many opinions, expect some visceral responses too.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- WeWork says it doesn’t expect to hit its 2020 financial targets as it grapples with the coronavirus outbreak.The impact of the virus “will likely have a negative impact” on the company, including on forward-looking information that it previously disclosed, Chief Executive Officer Sandeep Mathrani and Executive Chairman Marcelo Claure wrote in a letter to bondholders on Thursday that was obtained by Bloomberg.“In light of recent events relating to the COVID-19 pandemic and given the uncertainty of the current environment, we no longer expect to meet the previously disclosed targets for 2020,” the executives said in the letter. “We are in the process of reviewing and reevaluating the previously disclosed forward-looking information related to our other interim targets,” the executives said.WeWork said it had $4.4 billion in cash at the end of last year, enough liquidity for the troubled company to execute its turnaround plan even while navigating “near-term challenges and volatility” caused by the outbreak.WeWork bonds maturing in 2025 last traded at 35 cents on the dollar, according to data from Trace.The New York-based company said its revenue rose 90% in 2019 to $3.5 billion, according to the letter, which did not disclose whether it turned a profit. It had recorded $1.5 billion in revenue through the first six months of 2019, according to its initial public offering filing. It reported a net loss of $1.25 billion in the third quarter.WeWork had expected the fourth quarter of 2019 to be its first period as a public company. It calibrated the business to burn through the money it raised by leasing more office space and bringing in more customers. Those deals were already set in motion and couldn’t be stopped, even when the IPO imploded. The company has since shifted to focus on profitability instead of growth.WeWork spent the last few months of 2019 rapidly trying to cut expenses. The company said in November it was eliminating about 2,400 jobs and has sold several companies it acquired, often at steep discounts.The global pandemic is challenging WeWork’s already weakened business. Its largest investor, SoftBank Group Corp., threatened last week to unravel part of its deal to buy WeWork stock from investors and employees, including its ousted chief executive officer Adam Neumann. Two board members signaled they were prepared to fight to ensure SoftBank goes through with the deal.The company has temporarily shut down its locations when required by local authorities or when a customer in a building has been diagnosed with Covid-19. Otherwise, it has kept most buildings open. That has garnered criticism from customers, who say WeWork shouldn’t be charging them rent and encouraging people to go to the office when many are under shelter-in-place orders.More than a quarter of WeWork’s customers were on month-to-month leases as of last June, and many could choose not to renew contracts. In addition, some tenants could default on their monthly payments.“While the world navigates the COVID-19 pandemic and grapples with the uncertainty of what lies ahead, WeWork remains committed to supporting our members, many of which are essential to our society,” Mathrani and Claure wrote on Thursday.(Updates with bond trading.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- WeWork executives used to obsess over the number of people they could pack into each of the company’s shared workspaces. They said a more crowded office helped make the space feel active and spark collaboration when desk mates slid past each other in the hallways. The technique had an added benefit of maximizing revenue from each co-working office.It took only a few weeks and a global pandemic for that strategy to become a deterrent for customers and a major liability for a company that can’t afford further setbacks. The vast majority of WeWork offices remain open, though with far fewer people coming in than before. Offices that have shuttered only did so when explicitly ordered by authorities or after a confirmed case of a Covid-19 infection. Even then, locations are typically closed for an overnight cleaning and reopened the next day.For WeWork, already weakened after last year’s failed attempt to go public, complications from the coronavirus could deal a fatal blow. It’s refusing calls to refund customers stuck working from home or to release them from lease agreements without penalty, though it offered to waive planned rent increases in at least a couple of instances. At the same time, it’s trying to renegotiate terms with its own landlords to ease the financial burden. A spokeswoman for WeWork parent company We Co. declined to comment.Co-working companies are struggling to adapt while many of their customers—especially small businesses—consider cancelling contracts or are forced to default. More than a quarter of WeWork’s customers were on month-to-month leases as of last June, according to the company’s prospectus for the initial public offering.Knotel, a smaller WeWork rival that rents office space, is bracing for a work-from-home movement that could last as long as a year, said Amol Sarva, the chief executive officer. Like WeWork, Knotel is keeping locations open and asking tenants to continue paying for now while the startup grapples with the long-term effects on office usage. “I’m pretty sure that workplaces will never be the same after this,” Sarva said. “I've been listening and talking to people, and this is 9/11. It’s going to be on people’s minds for a long time.”Even before the virus, WeWork was reeling from the drastic cuts it made last fall to stay afloat. The company said in November it was terminating about 2,400 employees. The project’s codename among management was Huxley, a reference to the author of Brave New World, according to a person familiar with the matter who asked not to be identified discussing personnel matters. The dismissals continued with dozens of workers quietly losing their jobs last month, three people familiar with the move said. On Tuesday, WeWork filed paperwork with New York state for layoffs affecting 45 more workers.Cash remains a concern. WeWork said last week it has access to billions of dollars in debt, but as of September, the company was losing more than $400 million a month. WeWork’s largest backer, SoftBank Group Corp., is now threatening to unravel a deal to buy stock from other shareholders. Although SoftBank insisted it’s committed to WeWork, the move would block a much-needed $1.1 billion credit line to the company. The deadline for SoftBank to complete the deal is in a week.Finally, there’s the virus. Tenants facing economic hardships or prolonged mandates to work from home could choose not to renew short-term leases, leaving WeWork on the hook for billions in long-term lease liabilities.WeWork employees are questioning the company’s handling of the health crisis. When WeWork learned a tenant in New York City tested positive for Covid-19 last week, the location on Lexington Avenue was closed Thursday night for cleaning and open again on Friday, according to an email to tenants reviewed by Bloomberg. The Washington Post reported on a similar practice at the Madison Avenue location, which was closed, reopened the next day and then closed again after a different customer reported an infection. On Wednesday, two floors of the WeWork on Park Avenue were closed for cleaning and are set to reopen Friday, according to an email seen by Bloomberg.Executives have said, over objections from staff, that WeWork offices must stay open because some customers provide essential services, such as health care, insurance or cleaning supplies. “We have an obligation to keep our buildings open,” Marcelo Claure, the executive chairman, and Sandeep Mathrani, the CEO, wrote in a joint email to employees. The company underscored the message with a full-page ad in the New York Times on Sunday thanking customers providing “services to tackle Covid-19 and all those helping the wider community.”Each co-working company is responding differently to the outbreak. The Wing, a women-focused workspace provider that counted WeWork as a major backer until recently, closed all 11 locations, and Audrey Gelman, the CEO, said she contacted officials to offer the spaces “for relief efforts.” Another startup, called Convene, closed more than half its sites. Industrious, like WeWork and Knotel, is keeping offices available with limited staffing.As lawmakers around the world pass various measures to protect vulnerable tenants, co-working companies may not be able to collect rent in some places. In parts of Asia, WeWork instituted rent holidays for customers, according to a person familiar with the matter. WeWork is, in turn, seeking its own relief. It approached at least one large landlord in London about receiving short-term concessions on rent, a person with knowledge of the talks said.Adam Mutschler, an executive coach who rents a WeWork office for himself in Washington, D.C., said the company is being irresponsible by staying open and charging him during a crisis when officials are asking him to stay home. “Their messaging is about community,” Mutschler said. “But this is not a community move. If you cared, you’d close.” Mutschler said he signed a two-year lease last fall to save about 10% on his office space but that once the crisis is over, he wants to find a way to end his contract early.(Updates with additional office closure in the ninth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
SoftBank Group (SBG) Corp's shares plunged after three days of huge gains and the cost of credit derivatives to insure against bankruptcy rose on Thursday after Moody's downgraded the tech conglomerate's debt rating by two notches. SBG shares fell 9.4% following a 55% rise over the preceding three sessions as the firm became the first high-profile Japanese victim of a wave of corporate downgrades worldwide amid the coronavirus pandemic. Its five-year credit default swap spread rose to around 400 basis points from around 360 bps , reversing its fall in the past three sessions.
(Bloomberg) -- SoftBank Group Corp. lashed out at Moody’s Corp. after its debt was downgraded by two notches, accusing the ratings company of “bias” and “creating substantial misunderstanding” days after the investment group announced a $41 billion asset sale program intended to shore up confidence.SoftBank’s shares slid as much as 8.4% early in Tokyo trade. The Moody’s downgrade -- lowering SoftBank’s corporate family rating and senior unsecured rating to Ba3 from Ba1 -- pushed the company deeper into junk territory. It comes at a critical time for founder Masayoshi Son, who this week set in motion his biggest play yet to silence critics and shore up his company’s crumbling shares and bonds.“Such a downgrade, which deviates substantially from Moody’s stated rating criteria, will cause substantial misunderstanding among investors who rely on ratings in making investment decisions,” SoftBank said in a statement, which also asked Moody’s to withdraw the rating.While SoftBank had 1.7 trillion yen ($15 billion) of cash and equivalents on hand at the end of December, it also has a huge debt load: The firm faces 1.68 trillion yen of bonds and loans coming due over the next two fiscal years and a total of about 3.6 trillion over the following four-year period.Read more: Masa Son Unveils a $41 Billion Asset Sale to Silence His CriticsThe company, which also operates the $100 billion Vision Fund, is vulnerable to economic shocks given that debt, and its ties to unprofitable startups from WeWork to Oyo Hotels. Many of the Vision Fund’s biggest bets lie in what’s known as the sharing economy, which has been particularly hard-hit by the pandemic that’s causing millions of people to stay indoors. Travel spending has slumped as a result.SoftBank is said to be targeting the sale of $14 billion of stock in the Chinese e-commerce leader Alibaba Group Holding Ltd., as well as slices of its domestic telecom arm and Sprint Corp., which is merging with T-Mobile US Inc. But SoftBank risked unloading some of its most prized assets at a discount given the downturn, Moody’s said in its statement.“Asset sales will be challenging in the current financial market downturn, with valuations falling and a flight to quality,” said Motoki Yanase, a Moody’s senior credit officer in Tokyo.Read more: SoftBank Is Said to Plan $14 Billion Sale of Alibaba Shares“SoftBank’s decision to withdraw its corporate and foreign currency bond ratings by Moody’s probably wouldn’t save the company from higher new borrowing and refinancing costs.”Anthea Lai, analyst, Bloomberg IntelligenceThe scale of the endeavor unveiled by SoftBank on Monday surprised investors. Despite several days of gains, however, the stock remains down about 30% from its 2020 peak, underscoring persistent concerns that tumbling technology valuations will damage Son’s company. S&P Global Ratings said this week the asset sales could ease downward pressure on SoftBank’s credit quality.The rout triggered by the coronavirus has spread to credit markets and sparked a surge in the cost of insuring debt against default -- including that of SoftBank, whose credit-default swaps are near their highest level in about a decade. Apollo Global Management, the alternative asset management house co-founded by Leon Black, has placed a short bet against bonds issued by SoftBank because of its tech exposure, according to the Financial Times.(Updates with share action from the second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.