9984.T - SoftBank Group Corp.

Tokyo - Tokyo Delayed Price. Currency in JPY
5,540.00
+23.00 (+0.42%)
At close: 3:15PM JST
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Previous Close5,458.00
Open5,595.00
Bid0.00 x 0
Ask0.00 x 0
Day's Range5,439.00 - 5,580.00
52 Week Range3,958.00 - 12,025.00
Volume15,564,100
Avg. Volume13,321,740
Market Cap11.476T
Beta (5Y Monthly)1.63
PE Ratio (TTM)38.27
EPS (TTM)144.75
Earnings DateMay 07, 2020 - May 11, 2020
Forward Dividend & Yield44.00 (0.81%)
Ex-Dividend DateMar. 30, 2020
1y Target Est13,753.00
  • SoftBank profit all but wiped out by Vision Fund losses
    Reuters Videos

    SoftBank profit all but wiped out by Vision Fund losses

    SoftBank Group says its quarterly profits were all but wiped out. The Japanese investment giant eked out earnings of just 24 million dollars in the third quarter. That's a fraction of the same period a year ago. Profits were erased by a loss of just over two billion dollars at its flagship Vision Fund, which invests in tech firms. Wednesday's (February 12) results cast a deeper shadow over founder Masayoshi Son. Investors were already questioning whether to put money into his next venture, Vision Fund 2. It had previously attracted pledges of over 100 billion dollars. But Son's reputation had already taken a hit over the WeWork debacle. The U.S. office sharing company - a big SoftBank bet - had to be bailed out after a failed IPO. Now Son says the firm has turned the corner, pointing to a rally in prices of some of investments. But he also admitted scaling back Vision Fund 2, which right now hasn't attracted any outside investment.

  • SoftBank's Latest Fund Wheeze Sets Off New Alarms
    Bloomberg

    SoftBank's Latest Fund Wheeze Sets Off New Alarms

    (Bloomberg Opinion) -- SoftBank Group Corp. became vulnerable to activist attack by Elliott Management Corp. because of the harmful noise generated by the Japanese technology investor’s giant Vision Fund. That noise just won’t die down.Sunday brought a report in the Financial Times that Vision Fund head Rajeev Misra is looking to raise a multi-billion dollar fund to buy listed stocks. The blueprint was established last year with SoftBank’s investment in controversial German payments company Wirecard AG via a convertible bond. The new plan looks like a bid to do more unconventional equity investments in the same vein.The development marks a strategic departure. After all, the $100 billion Vision Fund was established to take stakes in private, tech-focused startups. SoftBank has already had to deny that there’s a “misalignment” between Misra and the group’s founder and Chief Executive Officer Masayoshi Son over the idea of investing more in public companies. But it’s not hard to see why Son, and other SoftBank shareholders, might need persuading.Setting up a listed-equity vehicle would bring in new revenues from management and performance fees. It could also create capital gains (or losses) from any investments in the fund that are made using SoftBank’s own capital. Whether it would make such commitments — and the decision-making around any such moves — is unclear. The FT said funding of about $4 billion is being lined up from sovereign funds in Abu Dhabi and Kazakhstan.There is some logic to Misra’s idea. It would, theoretically, marry SoftBank’s nous in emerging technology with the experience in trading and structured products possessed by a bunch of former bankers working for the Vision Fund. The result could bring a new dimension to SoftBank, similar to how the American buyout giants have become purveyors of real-estate, private-equity and credit strategies.The numbers being spoken of may be small relatively. But SoftBank’s core competence is in a specific sector, technology, and a specific category, late-stage venture capital. It needs to be crystal clear about why it would have an edge in the listed markets. The new offshoot would engage in financial engineering by wrapping listed investments in leveraged structures. But would it be looking to hire people or engage advisers with that expertise in a public-equity strategy if it didn’t already have it on the payroll? Or is the tail wagging the dog?SoftBank shares trade at a near 60% discount to net asset value, hence Elliott’s interest. That’s due largely to high-profile mishaps in the Vision Fund, such as WeWork, even though the fund still accounts for only a 10% slice of SoftBank’s overall managed assets. The risk is that, as with the Vision Fund, this venture has an outsized impact on sentiment toward SoftBank overall.Ironically, SoftBank has a huge opportunity already to dabble in the stock market and do financial engineering. The discount at which its shares trade means it could buy nearly $50 billion of underlying investments by spending $20 billion on its own stock. Son could fund such a buyback either by raising debt or selling some of SoftBank’s shares in Alibaba Group Holding Ltd., Sprint Corp., telecoms subsidiary SoftBank Corp. or even chipmaker Arm Holdings via a public offering. Maybe the brains in the Vision Fund could start by identifying which of these levers to pull.To contact the author of this story: Chris Hughes at chughes89@bloomberg.netTo contact the editor responsible for this story: James Boxell at jboxell@bloomberg.netThis 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.

  • Oyo’s Annual Losses Ballooned to $335 Million in 2019
    Skift

    Oyo’s Annual Losses Ballooned to $335 Million in 2019

    Losses for Oyo Hotels & Homes surged to $335 million in fiscal year 2019 compared to $50 million in red ink the year before, as the fast-growing budget hotel chain has been forced to pull back on its sweeping global growth strategy. Overall, the India-based hospitality startup posted a consolidated revenue of $951 million in […]

  • SoftBank-backed Oyo says annual loss grew over six-fold on China expansion
    Reuters

    SoftBank-backed Oyo says annual loss grew over six-fold on China expansion

    SoftBank-backed Oyo Hotels and Homes said on Monday losses widened more than six-fold in the year to March 2019, as the India-based hotel chain spent heavily to expand into China. The news comes weeks after Oyo began laying off roughly 2,000 employees in India, as it inches toward profitability, and days after its major investor SoftBank Group reported dismal quarterly results. The Japanese firm owns about 46% of Oyo.

  • Masayoshi Son’s Other Big Real Estate Bet Has Some Real Problems
    Bloomberg

    Masayoshi Son’s Other Big Real Estate Bet Has Some Real Problems

    (Bloomberg) -- Last March, months before the meltdown at WeWork, Masayoshi Son worked through the prospects for another one of his favorite portfolio companies -- a startup from India called Oyo. In a spacious conference hall at his Tokyo headquarters, the Japanese billionaire huddled with lieutenants from the startup and his own SoftBank Group Corp. to brainstorm strategy. He figured Oyo had the potential to disrupt both the staid hotel business and short-term apartment rentals in Japan, according to people in the room.One bullet point scribbled on a floor-to-ceiling whiteboard, in particular, caught Son’s eye: a target of one million rooms within a year. In a burst of enthusiasm, he had everyone sign off on the goals right on the whiteboard, scrawling signatures under the words “BINDING” in all caps, according to a copy seen by Bloomberg News and the people present.Today, the Oyo unit handling apartments has about 7,500 rooms, less than 1% of the whiteboard target. Son’s aspirations turned out to be an example of dramatic overreach, part of a year in which the Japanese investor’s reputation was battered by troubles at WeWork and Uber Technologies Inc.The shortfall, which hasn’t been reported before, signals more trouble ahead for SoftBank and one of its most highly touted investments. Perhaps more concerning, the episode reveals a fundamental flaw in SoftBank’s investment strategy: Pumping billions into startups and pushing them toward outsized growth often undermines promising businesses. With its chaotic rush to expand in Japan, Oyo infuriated potential partners, alienated workers and jeopardized its reputation with local customers, according to interviews with more than two dozen of them. One incensed local customer went so far as to set up an Oyo Life Victims Association account on Twitter. Similar frustrations have been voiced by customers and hotels in India and other overseas markets.The troubles are so pronounced Son faced questions about Oyo during his earnings briefing in Tokyo last week. He conceded there have been “some conflicts with hotel owners,” but said that is normal in such businesses and overall the performance is good. “Oyo is a wonderful company,” he said.SoftBank declined to comment on the startup’s internal issues and practices beyond Son’s comments, but said it believes the company can have a sustainable expansion in Japan with good corporate governance.Oyo, founded by 26-year-old Ritesh Agarwal, has drawn particular attention in SoftBank’s portfolio of startups because of its similarities to WeWork. Both are trying to change traditional real estate businesses with technology. Both have charismatic young founders. Now, skeptics say Oyo could also fall short, further undermining Son’s grand ideas about technology investing.“Oyo is a WeWork in the making,” says Santosh Rao, head of research at New York-based Manhattan Venture Partners. “They need to slow down and pull back.”Oyo says patience is in order. In an interview, Agarwal argues his company is bringing new concepts to a business in need of fresh thinking, especially in markets like Japan. He acknowledges “teething issues” that are to be expected for a fast-growing, innovative startup and defended the use of ambitious goals.“Leaders at Oyo aspire for ambitious targets which act as directional north stars for building for scale,” he said. “From our shareholders perspective, they have said – you have a good business plan, you have continued operating as per your business plan, please keep delivering against that.”SoftBank is the largest outside shareholder at the company, whose backers also include Sequoia India and Airbnb Inc.The last thing Son needs now is another big mistake. He wants to raise capital for a successor to his $100 billion Vision Fund, but potential backers have been spooked by WeWork and Uber, as he conceded last week. At the same time, activist Paul Singer has taken a stake in SoftBank, advocating for changes to boost its share price including a buyback and more transparency.“Son needs to focus on rebuilding his reputation,” says Atul Goyal, senior analyst at Jefferies Group. “If Oyo blows up, that won’t be easy.”Agarwal got the idea for Oyo after roaming around India on a shoestring budget, witnessing first-hand the opportunity to bring order to the anarchic industry. At 19, he set up a reservation website and began working with small hoteliers on service, design and standardized accouterments like bedding and toiletries to draw more travelers. Oyo took 25% of sales.In India, the concept took off. The reassurance of basic quality fostered trust with customers and brought in extra revenue. Enamored of the idea and Agarwal, Son invested in 2015, two years after founding.But as SoftBank started the original $100 billion Vision Fund in 2017 and Son invested in the world’s biggest startups, he began to stoke Agarwal’s dreams with money and ambition, according to people directly involved. Son poured about $1.5 billion into the company and encouraged the young founder to try to become the world’s largest hotel operator by room count. That would mean surpassing Marriott International Inc., founded in 1927.The business model that worked so well in India wasn’t an obvious fit for markets like the U.S. and Europe, which already had well-established hotel chains and largely predictable quality. Yet Agarwal slogged ahead overseas, even buying a few properties outright, including the Hooters Casino Hotel in Las Vegas.Japan was supposed to be like a second home. Son is a local hero and SoftBank’s brand is ubiquitous: It operates one of the largest wireless carriers, runs the leading web portal and owns the Fukuoka SoftBank Hawks, which have won five of the last six baseball championships. SoftBank set up joint ventures through two subsidiaries to promote Oyo’s local business.That support fueled Oyo’s confidence as it entered Japan in early 2019. Agarwal decided to push into both its traditional hotels business and a newer operation called Oyo Life, which offers furnished apartments without the typical hassles of security deposits or guarantors. With Son’s enthusiastic backing at the March meeting, Agarwal and his team set the audacious goal of becoming the biggest operator in both businesses -- in one year.“Many entrepreneurs want to do a land grab, and it’s often the right thing to do, but you have to balance between your desire and ability to do it,” says Ben Narasin, venture partner at New Enterprise Associates Inc., which isn’t involved with Oyo.There were missteps at Oyo from the start. The Japan hotel team, led by a transplant from India named Prasun Choudhary, figured they could get to as many as 75,000 rooms in the first year, which would put them ahead of the Apa Hotels chain in the No. 1 spot. But they took as their starting point an inflated addressable market of 1.6 million rooms based on numbers from the local tourism authority: They included campgrounds, bed-and-breakfasts and pay-by-the-hour love hotels, which weren’t part of Oyo’s business plan, according to people involved at the time.Oyo Life, the apartment rentals business led by another Indian lieutenant called Kavikrut (who like many Indians goes by one name), set the goal of 1 million rooms in part because it was a stunning, round number that would exceed the capacity of the Japan market leader, the people said. That was the target that caught Son’s attention in March.To reach their goals, the two lieutenants began hiring furiously. Human resources staff conducted as many as 15 interviews a day, making offers to many the same day, people involved said. At job hunting events, prospects would get recruited on the spot, sometimes signing hand-written offer letters. Oyo Hotels surged to more than 580 people, while Oyo Life added 300, the company said.“Oyo believes that building a highly-motivated local team and strong management leadership is an important strategy for launching and succeeding in a new market,” Choudhary said in an interview. “This team is what has made it possible for us to partner with over 190 hotels.”But Oyo’s technology wasn’t ready. In the first three months after launch, the hotel operation double booked rooms because it had failed to integrate with local travel agencies, according to Oyo and former employees. Staff in India entered reservations made in Japanese manually, introducing errors. Some hotel owners found their rates reduced to just pennies by inscrutable algorithms. When they complained, the fix would take days because pricing was controlled in India, according to former employees.At the same time, Oyo Life workers struggled to keep track of keys they received from landlords because of software created in India. One tenant interviewed by Bloomberg spent the night in his car outside of his new apartment because he was given a wrong code for a lock box containing the keys. Even though it was during working hours, no one was manning the help lines at the company, he said. Two other customers interviewed by Bloomberg also had trouble getting into their apartments.“Oyo operated like they were driving a Ferrari, instead of a hatchback,” said Taito Ito, executive officer at Japan Accommodation and Lodging Foundation, a hotel industry group handling about a dozen complaints against the company from its members. “It’s difficult to see this business going anywhere in Japan.”There were some satisfied customers, including one Oyo Life user who raved about the convenience of getting an apartment via an app and raking in points by paying rent with a credit card.Despite the rocky start, Agarwal landed a starring role in July at SoftBank World, an annual event Son hosts in Tokyo. On stage in front of hundreds of the Japanese company’s suppliers and customers, Agarwal explained how Oyo is using data to beat the competition. Its algorithms can evaluate properties in under five days, compared with months for traditional hotels, he said. Artificial intelligence helps Oyo predict what kind of interior design can boost demand -- like pictures of Marilyn Monroe -- and adjust prices more than 43,000 times a minute.Beaming on stage, Son said it was only a matter of time before Oyo, the third-biggest hotel chain by room count, would surpass the established giants.“In three months, he will become the world’s biggest hotel king,” Son said at the time. “This would be a first in human history.”Unbeknownst to the crowd, Agarwal and Son were in talks about an unprecedented deal at the time. To increase his stake in Oyo, the young founder would borrow $2 billion to buy out some of his earlier investors. To reassure banks including Mizuho Financial Group Inc. to lend the money, Son personally guaranteed those loans, a highly unusual arrangement. The deal would double Oyo’s valuation to $10 billion.Just weeks later, in early August, it became clear Oyo’s hotel business in Japan was falling far short of its targets. Agarwal told Choudhary to start firing under-performing staff, according to a message reviewed by Bloomberg News. But top management didn’t realize at first that labor laws in Japan prohibit such layoffs, according to former HR staff.Oyo had begun hiring before it set up all its operations, so many employees joined under temporary contracts through an outside recruiter with a plan of making them full-time after six months. When that time came, Oyo tried to cut salaries for a number of them as much as 50%, according to former employees and copies of documents seen by Bloomberg News.Alarmed by worker complaints, SoftBank sent its own compliance staff into Oyo for a week-long internal audit, the people said. In the end, Agarwal’s management withdrew the low-ball offers and said the revisions were an administrative mistake. Oyo says it wasn’t downsizing and was only making a fair assessment of staff. Choudhary acknowledges that, at first, Oyo thought it could manage performance in Japan like it has in the rest of the world.Several former Oyo Life employees, who declined to be named because they signed confidentiality agreements, described a chaotic, disorganized work environment. The company poached executives from top-tier consulting and technology firms who excelled at inspirational talk, but had little understanding of real estate and even less patience for the industry’s slow-moving ways, the people said. One of them said the real estate industry just doesn’t run on startup time.The push for growth hurt Oyo’s relationship with suppliers too. In one instance, the company placed a 100 million yen ($910,000) furniture order with Japanese maker Takumi Otsuka, clinching the deal with a handshake. A month later, Oyo canceled even though the manufacturer had already set up a dedicated line and began production, according to staff from Oyo.Oyo denied the cancellation of any confirmed orders, but acknowledged there were lapses in communication in its early dealings with Takumi Otsuka. Oyo says the two companies now share a healthy business relationship and the furniture maker remains one of its valuable suppliers. Takumi Otsuka declined to comment.In October, with Oyo Hotels short of its original targets, the company mobilized support staff to do sales. It launched Project Yukichi, named after a famed educator whose face is on the 10,000 yen bill, with the goal of that many new rooms a month. The workers, already struggling to keep up with complaints from hotel owners, were told they are also responsible for producing 30 new sales leads a month, according to former employees and company presentations. The “OYOpreneurs,” as they were called, got a three-day training session from Bain & Co. to get them up to speed, the people said.With so much energy focused on sales, customer service suffered. One Oyo Life tenant told Bloomberg News he moved into his room to find bed sheets and covers, but no bed or mattress to put them on. After facing a prospect of sleeping on the floor for a week, he hauled over a futon from his parent’s house.Yutaro Kondo, a 25-year-old entrepreneur, paid 86,000 yen for a 21-square-meter studio about an hour by train from central Tokyo. While a premium to similar listings, the contract covered internet access, all utilities and the last month free of rent. But he didn’t have heat for weeks so he moved out in December. Shortly after, he got a bill for the month that was supposed to be free.“The simplicity they offered is attractive to a lot of young people,” Kondo said. “I feel pretty disappointed they didn’t deliver on that promise.”Hotel owners are unhappy too, especially with disputes over money. Oyo aimed to increase business for its partners by dropping rates at first and then increasing the price as occupancy went up. To help ease the pain, it guaranteed owners a minimum level of revenue provided they met certain criteria. Instead, a number of hotels found the payments fell short and the company unwilling to make up the difference.Oyo acknowledged such disputes and said that in some cases hotels failed to fulfill their contractual obligations. Still, it said it decided to pay in full to mend relations. One SoftBank executive said there were troubles between Oyo and about 40 hotels out of about 200, emphasizing many hotel owners are satisfied.“Employees are exhausted from dealing with Oyo,” said Shingo Ozaki, who manages Hamakan Hotel on the southwestern island of Kyushu, which is considering ending its relationship with the startup.Oyo said it is continuously working to improve software and it launched a call center that in the past month handled 1,700 tickets from partners and guests.Late last year, after the debacle at WeWork, Son overhauled his approach to startups. At a gathering of portfolio companies in California, he cautioned founders that they need to have a strategy for profitability and that growth couldn’t be the sole target. Agarwal was in attendance.But any changes may be too late for Oyo in Japan. In December, news leaked out that SoftBank’s Yahoo Japan sold its stake in Oyo Life, liquidating the partnership without any explanation. In Japan, the hotel room count has stalled at little over 5,000, with just over 300 new rooms added in December.Oyo disclosed this week that revenue increased more than four-fold to $951 million for the fiscal year ending in March 2019, while losses surged six-fold to $335 million.“Entrepreneurship is a game where you have to learn to crawl, then walk and only then to jog and run,” said Narasin of NEA. “Skipping steps can be dangerous.”At least some hotels are giving up, tired of the troubles they’ve had with Oyo. Shoji Sato, president of the company that runs an Oyo affiliate called Sawara Kita Hotel, said the company didn’t pay revenue guaranteed for January after reducing room prices to draw more customers. He said Oyo workers often ignore his inquiries or are slow to respond too. Oyo said there is no delay in payment because the January cycle closes in mid-February.“I believed in Oyo after the salesman showed me a brochure with details about SoftBank. SoftBank is led by Masayoshi Son, who is very famous and popular in Japan,” says Sato. “Now we want to end the relationship. I am angry, of course, of course.”(Updates with financial results in fourth from last paragraph)\--With assistance from Saritha Rai and Kurumi Mori.To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Takahiko Hyuga in Tokyo at thyuga@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Peter ElstromFor 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.

  • India’s Oyo Reports $335 Million Loss on Revenue of $951 Million
    Bloomberg

    India’s Oyo Reports $335 Million Loss on Revenue of $951 Million

    (Bloomberg) -- Oyo Hotels & Homes, the Indian lodging startup, reported a four-fold increase in revenue for the year ending in March 2019, a dated but detailed disclosure of results at the controversial company backed by SoftBank Group Corp.The six-year-old Oyo increased revenue to $951 million for the fiscal year 2019, from $211 million for the previous year. Losses climbed to $335 million, or 35% of revenue, from $53 million, or 25% of revenue, as the startup expanded into China and other new markets. India’s regulations require companies like Oyo to disclose their financials, but with lags that can reach about a year.Oyo, founded by 26-year-old Ritesh Agarwal, began in India as a way to reserve budget accomodations online with reliable quality. With the backing of SoftBank, the company has expanded internationally and is aiming to become the biggest hotel chain in the world by room count. Its aggressive expansion has proven controversial after another SoftBank portfolio company, WeWork, crashed after attempting to go public.In its results, Oyo focused on its progress in moving toward profitability and global expansion. For example, India accounted for roughly 63.5% of its revenue in fiscal 2019, down from 99% the year before. In addition, Oyo’s loss in India was 14% of revenue, down from 24% the year before.“We are on the path to profitability,” said Aditya Ghosh, a board member, in a media conference call after the figures were released. “We haven’t set a timeline for profitability, but revenues are growing, losses have halved and margins are looking healthy.”Masayoshi Son’s Other Big Real Estate Bet Has Some Real ProblemsIts gross margin rise to 14.7% from 10.6%, the company said. Oyo has cut back in certain markets, firing about 20% of its 12,000 people in India for example.“We have pulled out of 200 cities in India, and these accounted for less than 5% of revenues,” said Rohit Kapoor, chief executive officer for India and South Asia.The two executives were cautious about the China market, given the coronavirus that has all but put a halt to travel.“The coronavirus crisis is gripping all of China, it will impact the business in the short term. We can’t say how much,” said Ghosh. “It is too soon to say how much our business will get impacted, there are too many affected provinces and it is too sensitive a matter.”Read more: Ritesh Agarwal, the Amazingly Ambitious HotelierTo contact the reporter on this story: Saritha Rai in Bangalore at srai33@bloomberg.netTo contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin ChanFor 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 Fund Draws Investors for Hedge Fund-Style Vehicle: FT

    (Bloomberg) -- The head of SoftBank Group Corp.’s $100 billion Vision Fund has billions of dollars of support for a hedge fund-style vehicle, according to the Financial Times, citing people with direct knowledge of the matter who weren’t identified.Rajeev Misra, head of the Vision Fund, has support from Abu Dhabi’s state fund Mubadala and the government of Kazakhstan, one person involved in the talks said. The two funds are considering putting up as much as $4 billion together for the vehicle, the person added, the newspaper reported.Akshay Naheta, a former hedge fund manager and one of Misra’s closest allies at SoftBank’s investments unit, would manage the new Abu Dhabi-based fund, three of the people said.Naheta drove the money-making bet on German payments company Wirecard AG last year, made through the SoftBank Strategic Investment Fund, the FT said. That fund will be used for the new trading strategy, it added.To contact the reporter on this story: Hailey Waller in New York at hwaller@bloomberg.netTo contact the editors responsible for this story: James Ludden at jludden@bloomberg.net, Linus Chua, Steve GeimannFor 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.

  • Thomson Reuters StreetEvents

    Edited Transcript of 9984.T earnings conference call or presentation 12-Feb-20 7:00am GMT

    Q3 2020 SoftBank Group Corp Earnings Presentation

  • How Done Is the Sprint Deal?
    Bloomberg

    How Done Is the Sprint Deal?

    (Bloomberg Opinion) -- Is Sprint Corp. a duck or a rabbit?Bear with us. Earlier this week, SoftBank Group Corp. founder Masayoshi Son showed investors a bemusing slide with an ambiguous image of a duck and rabbit. If you look at the picture from the right, you see a different critter than the view from the left.In his characteristically gnomic fashion, he was trying to suggest that there were two ways of evaluating SoftBank, and investors were doing so from the wrong perspective. But the analogy could also hold true for Sprint, the U.S. carrier in which SoftBank is the biggest shareholder, and whose planned merger with rival T-Mobile US Inc. finally secured the regulatory green light on Tuesday.When it was agreed back in April 2018, the all-stock deal gave Sprint an equity value of $27 billion. Since then, the two firms’ trajectories have diverged. Prior to Tuesday’s decision, T-Mobile stock had gained 31%, while Sprint had fallen 26%. Because Sprint shareholders are set to get T-Mobile shares in exchange for their existing stock, the value of the deal had therefore climbed to $36 billion, while the market only valued Sprint at $20 billion.So you can see why Deutsche Telekom AG, which owns 63% of T-Mobile, is now seeking to renegotiate the terms of the deal, whose existing terms lapsed in November. It looks like it might now be overpaying, so Tim Hoettges, the German firm’s CEO, has a fiduciary duty to his shareholders to at least give it a try.Here’s the metaphorical duck. Son is more vulnerable than he might have been just a week ago. That’s because the activist investor Elliott Management Corp. has built a stake in SoftBank, seeking governance improvements and a $20 billion buyback. SoftBank is meanwhile trying to find the capital for its new, reduced Vision Fund, the follow-up to the $100 billion pot of venture capital cash that Son used to make outsize bets on Uber Technologies Inc., WeWork parent We Co. and some 80 other firms over the past three years. The deconsolidation of Sprint reduces its debt exposure, while selling the remaining stake could free up capital to invest in the new fund or buybacks. The current deal terms value its stake at about $30 billion.What’s more, Sprint needs the merger more than T-Mobile. The declining share price has been driven by lackluster earnings and falling subscriber numbers. In the almost two years since the deal was agreed, Sprint’s number of subscribers has fallen by 460,000 to 54 million at the end of December. T-Mobile has meanwhile added 12 million customers for a total of 86 million.Now for the rabbit. A major renegotiation only becomes realistic if Deutsche Telekom and T-Mobile are prepared to walk away from the deal. T-Mobile stock’s 13% jump after the takeover was approved on Tuesday suggests that shareholders are happy with the deal even under the current terms. It will create value by reducing the cost of new 5G networks; giving the new company more pricing power over its customers; and letting the German-controlled firm get hold of Sprint’s valuable wireless frequencies.Ultimately, the deal remains in both firms’ interests. Deutsche Telekom would probably prefer an expensive takeover to no deal at all. Were the terms to be reevaluated based on the diverging stock prices, then T-Mobile could expect a swap ratio of at least 12 Sprint shares for each of its own (assuming a $27 billion valuation), up from the 9.75 shares agreed two years ago. Is such a drastic change likely? No. But given SoftBank’s need for cash, there’s a good chance it will be open to concessions to get the deal done.To contact the authors of this story: Alex Webb at awebb25@bloomberg.netTim Culpan at tculpan1@bloomberg.netTo contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.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.

  • T-Mobile Parent Deutsche Telekom Seeks New Terms for Sprint Deal
    Bloomberg

    T-Mobile Parent Deutsche Telekom Seeks New Terms for Sprint Deal

    (Bloomberg) -- Deutsche Telekom AG wants to renegotiate the terms for the sale of Sprint Corp. to its U.S. wireless unit T-Mobile US Inc., according to people familiar with the matter.The German carrier, the majority owner of T-Mobile, is seeking a lower price because Sprint’s shares have been trading below their level when the deal was proposed in 2018, said the people, who asked not to be identified as the deliberations are private.Getting one of the biggest U.S. wireless mergers ever over the finish line would be a boon to both companies. For Deutsche Telekom, the deal reduces its reliance on Europe, where carriers are struggling to grow amid fierce competition. For the chairman of Sprint owner SoftBank Group Corp., Masayoshi Son, it allows him to better focus on his technology investments and the $100 billion Vision Fund. The renegotiation talks are expected to start soon, the people said. They would follow a victory for the companies in a U.S. court this week, when a federal judge rejected a state lawsuit against the tie-up. Now the deal is in the home stretch, with only minor approvals left to secure and final financial terms to be ironed out. SoftBank declined to comment. Deutsche Telekom didn’t immediately return a call seeking comment.Deutsche Telekom shares fell 1.4% in Frankfurt as of 12:58 p.m. on Thursday. What Bloomberg Intelligence Says:Deutsche Telekom has limited leverage to renegotiate the terms of its Sprint acquisition, we think, even as the valuation of the latter jumped to $75 billion from $60 billion in 2018 under the deal terms, despite worsening operational performance. The allure of consolidation, including the acquisition of an attractive spectrum portfolio, suggests only a modest potential improvement in stock-exchange ratio.\-- Erhan Gurses, BI telecoms analystClick here for the researchFrequency ConstraintsWhile Sprint’s standalone value has dropped, SoftBank also sees itself in a good position because T-Mobile needs Sprint’s wireless frequencies or would face capacity constraints within as little as two years, one of the people said.T-Mobile’s importance for Deutsche Telekom has grown steadily in recent years and it now accounts for about half of group sales, up from around a third in 2014. T-Mobile and Sprint haven’t renewed the merger agreement since it lapsed on Nov. 1, and there have been discussions regarding several issues that T-Mobile Chief Executive Officer John Legere described as “not hostile” that month on an investor call. T-Mobile has suggested there could be new terms.The combined company, which will operate under the T-Mobile name, will have a regular monthly subscriber base of about 80 million -- in the same league as AT&T Inc., which has 75 million subscribers, and Verizon Communications Inc., which has 114 million. T-Mobile will have more wireless frequencies than any other U.S. carrier, giving it an advantage as the industry transitions to the next generation of wireless technology, the much-faster 5G standard.Bloomberg News reported Wednesday that Sprint and SoftBank would likely have to accept a lower price than when the merger agreement was first forged in April 2018. Sprint’s monthly churn -- a closely watched measure of how many customers leave -- has risen to nearly 2%, which means roughly a quarter of its subscriber base is quitting the carrier each year.The German company is likely to leverage that to negotiate a lower price, but Sprint also has valuable radio frequency spectrum without which T-Mobile US will face serious bottlenecks, a person familiar with the matter told Bloomberg on Wednesday.The Financial Times previously reported that Deutsche Telekom is pushing to renegotiate terms of the deal, citing unidentified people familiar with the matter.(Updates with analyst comment in fifth paragraph)\--With assistance from Stefan Nicola.To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Scott Moritz in New York at smoritz6@bloomberg.netTo contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer, Jennifer RyanFor 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’s Son Considers New Type of Fund for Startup Investing

    (Bloomberg) -- SoftBank Group Corp. founder Masayoshi Son said he is considering a new type of fund for startup investing, showing his determination to keep cutting deals after missteps with WeWork and several other companies.The Japanese billionaire unveiled his $100 billion Vision Fund three years ago and had been planning on raising a similarly sized second Vision Fund. But as he discussed earnings in Tokyo Wednesday, he conceded that raising money from limited partners for the second fund has been difficult and he may instead make startup investments solely with SoftBank’s capital for a year or two.“A lot of our planned investors have been worried by the trouble at WeWork and Uber and we heard their feedback,” Son said. “So before we officially launch SoftBank Vision Fund 2, maybe we start from a smaller scale and start from a shorter period in terms of investment as sort of a bridge.”“So I’m beginning to think about that kind of two-step approach,” he said. “We have not made any official decision yet, but that’s one of the options that we started considering. Again, we have not come to a conclusion yet.”Son’s somewhat opaque comments came after SoftBank reported that the Vision Fund had lost money for the second quarter in a row, reflecting the decreased value of startups it has backed. The Vision Fund lost 225.1 billion yen ($2.05 billion) for the three months ended in December, after losing 970.3 billion yen the quarter before including WeWork and Uber Technologies Inc.”Mr. Son said that he may consider delaying SVF2 or a smaller SVF2. Given our view that SVF2 is a big risk, this statement is welcome,” said Atul Goyal, an analyst at Jefferies Group, in a research report.SoftBank set up the original Vision Fund with money from outside investors, led by Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co. But for years before that, SoftBank made deals with its own capital, including early investments in Alibaba Group Holding Ltd. and Yahoo! Corp. During the dot-com boom, Son took stakes in hundreds of internet companies.Indeed, before the first Vision Fund, SoftBank set up an entity called Delta Fund that was used for startup deals, including some that eventually were moved into the Vision Fund. Son could simply inject capital into that vehicle. SoftBank had weighed contributing $40 billion to $50 billion of its own capital for the second fund, people familiar with the matter have said.“We can make investment on our own or we can work with partners, new or existing,” Son said.He did explain that SoftBank continues to back startups with its own money.“We made several investments because we do have a very good pipeline,” Son said Wednesday. “It’s a hundreds of billions yen level.”He added that he is no longer targeting $108 billion for the second fund and wasn’t precise about what the expected size would be.“We shouldn’t be postponed too long,” he said. “First, make it a little bit smaller for 1 to 2 years, raise some bridge money, while were are building a track record. Then once we have results, I want to raise an official second fund.”To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Takahiko Hyuga in Tokyo at thyuga@bloomberg.netTo contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin ChanFor 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 Founder Son Says He’s Open to Working With Elliott
    Bloomberg

    SoftBank Founder Son Says He’s Open to Working With Elliott

    (Bloomberg) -- SoftBank Group Corp. founder Masayoshi Son opened the door to making at least some of the changes championed by activist investor Paul Singer, after the Japanese company reported a second quarter of losses from its startup investing.Son called Singer’s Elliott Management Corp. an “important partner” and said he is in broad agreement with the investor about SoftBank buybacks and share value. Son said he is on the side of shareholders, especially since he is the largest stockholder at the company. The two billionaires held discussions a couple weeks ago, he said.Son is adopting a more conciliatory stance just as he’s stumbling with his signature effort -- the $100 billion Vision Fund, which made him the biggest investor in technology. The fund lost money in the three months ended in December, one quarter after the meltdown at WeWork triggered a record loss for the Japanese company. On Wednesday, Son said he is no longer targeting $108 billion for a second fund and SoftBank may finance the effort on its own.“We are thankful that such a distinguished investor has joined us as a friend,” Son said at a press conference in Tokyo to discuss earnings. “We are basically in agreement on carrying out large buybacks when the finances allow it.”Elliott disclosed a stake of almost $3 billion in SoftBank this month, arguing the company’s shares are substantially undervalued compared with its assets. It has advocated for a share buyback of as much as $20 billion, along with governance changes and more transparency about its investments.The Vision Fund lost 225.1 billion yen ($2.05 billion) for the three months ended in December. SoftBank Group reported a slim operating profit of 2.6 billion yen, compared with the 344.7 billion yen average of analyst estimates.The past 12 months have been a roller coaster for Son and SoftBank investors alike. A year ago, the company unveiled a record buyback, sparking a rally that pushed shares to the highest since its dot-com peak in 2000. Uber Technologies Inc.’s disappointing public debut and the implosion of WeWork wiped out the gains over the next few months. But SoftBank surged again in the past week after Singer disclosed his stake and Son won approval to sell his Sprint Corp. to T-Mobile US Inc.SoftBank shares are up about 21% this year. They were little changed in Tokyo trading Thursday.Son focused on the positive in the presentation to shareholders and the media in Tokyo. He said the Vision Fund is on track to return to profit in the current quarter. The eight portfolio companies that are publicly trading, including Uber, Slack Technologies Inc. and Guardant Health Inc., have added $3 billion in paper profit in the current three months, he said.“At the last earnings briefing I used the words ‘I regret’ 20 times. But after a difficult winter always comes spring,” Son said. “The tide is turning,” he added, standing in front of a slide with the same words and a crashing wave.The most dramatic change in portfolio value since the quarter closed was Uber, whose shares have climbed more than 35% this year. That, Son said, means the Vision Fund’s stake is now worth $1.5 billion more than its investment, compared with $1 billion less at the end of December.The Vision Fund’s overall performance was murkier. SoftBank said the fund’s portfolio remained unchanged from the previous quarter at 88 investments. It reported a gain in valuation for 29 companies in the December quarter, while 31 saw their worth decline. The unrealized gain on the investments, or the difference between the cost at which it acquired the stakes and their present fair value, shrunk to $5.2 billion. That’s less than a third of the paper profit SoftBank reported six months ago.Atul Goyal, an analyst at Jefferies Group, pointed out that the losses at Vision Fund essentially wiped out profits created by the rest of the company.“These results validate our concerns that most other things that SBG does outside of Alibaba have led to distractions or value destruction,” he wrote in a research note.Vision Fund 2 Is Risk to SoftBank Investors, Analyst Says (Video)SoftBank said it is introducing new governance standards for its portfolio companies, including the composition of the board of directors, founder and management rights, rights of shareholders, and mitigation of potential conflicts of interest. The new rules will “enhance value creation and liquidity” at portfolio companies, it said in a statement.Elliott wants SoftBank to set up a special committee to review the investment process at the Vision Fund, which it thinks has dragged on the share price despite making up a small portion of assets under management, people familiar with the matter have said.Son’s best bet to date is still the investment he made in Alibaba two decades ago. In the latest quarter, SoftBank said it booked a 331.9 billion yen gain from the e-commerce giant’s listing in Hong Kong.That deal turned Son’s $20 million into a stake worth over $130 billion, a spectacular return that cemented his reputation as an investor and helped him raise the original $100 billion Vision Fund. But the track record since then has been spotty. In addition to the WeWork fiasco, he suffered setbacks at portfolio companies, including Wag Labs, Zume Pizza and Brandless Inc.Son, asked repeatedly about the second Vision Fund at the conference in Tokyo, said he still wants to raise the money but acknowledged the WeWork troubles have set back those plans. Major backers of the first fund, Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co., have remained on the sidelines so far. He said SoftBank may start with a smaller, bridge fund so it can keep doing deals.“A lot of our planned investors have been worried by the trouble at WeWork and Uber and we heard their feedback,” Son said. “It’s fully possible for us to carry on investing entirely with our own funds.”He wasn’t precise about what the size of the fund would be, and said that it “seems right that the scale is somewhat reduced this time.”At a Milken Institute conference in Abu Dhabi on Wednesday, Vision Fund head Rajeev Misra said that the second fund has already made seven investments and another six are in the pipeline. About a dozen companies from the first fund are expected to list in the next 18 months, he said.“There’s no rush, they don’t need capital,” Misra said. “A lot of them won’t even raise capital through an IPO, it will be a direct listing.”SoftBank has weighed contributing $40 billion to $50 billion for the second fund, people familiar with the matter have said.“The company will struggle to fund both Vision Fund II and buybacks unless they get a large outside commitment to VF II,” Chris Lane, an analyst with Sanford C. Bernstein, said prior to the announcement.SoftBank’s last share re-purchase was announced about a year ago, a record 600 billion yen.The company’s own sum-of-parts calculation puts its total value at more than 12,000 yen a share. That’s more than double SoftBank’s actual share price, which values the company at about $110 billion. Elliott thinks SoftBank’s net asset value could be about $230 billion, people familiar with the discussions have said.Son urged investors to focus on SoftBank’s shareholder value, which would include its stake in Alibaba, rather than operating profit, which is swayed by share price fluctuation in investments like Uber. To illustrate, he showed a slide with a famous visual illusion that can look like a duck or a rabbit depending on perspective.“The only measure by which SoftBank, an investment company, should be evaluated by is whether shareholder value rises or falls,” he said.(Updates with shares in eighth paragraph)\--With assistance from Nicolas Parasie.To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Takahiko Hyuga in Tokyo at thyuga@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Peter ElstromFor 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's Biggest Name Is One Son Dare Not Mention
    Bloomberg

    SoftBank's Biggest Name Is One Son Dare Not Mention

    (Bloomberg Opinion) -- SoftBank Group Corp.’s chairman took to the stage Wednesday afternoon to gloat about the company’s return to profit in a horrible year and to name drop some of the wonderful companies in his orbit. But the most important name of all was missing: Paul Elliott Singer. Getting top billing in Masayoshi Son’s earnings presentation was Alibaba Group Holding Ltd., which netted the Japanese company a 331.9 billion yen ($3 billion) paper gain for the fourth quarter, and telecom arm SoftBank Corp., contributor of 244 billion yen in operating profit. Sprint Corp. also added to the bottom line, though investors were more excited Wednesday about the long-awaited approval of its merger with T-Mobile US Inc.Son couldn’t escape mentioning WeWork, formally know as The We Co., because it’s the elephant in the room weighing down the Vision Fund and by extension all of SoftBank. The $100 billion fund now has 88 portfolio companies. But Elliott Management Corp., the investment firm founded by Singer, was conspicuous by its absence in Son’s vocabulary. As a result, his evasion became an unintended key feature of his entire live performance.The famous activist investor was still there, writ large in a statement titled “SoftBank Group Adopts Enhanced Governance Standards for Investments.” Just last week, Elliott confirmed it had taken a nearly $3 billion stake in SoftBank because it saw room to close the gap between the value ascribed by equity investors and what its own balance sheet indicates. That news helped drive SoftBank’s share price up 8% for the largest gain in a year, a jump that was topped just a few days later when  the merger of the two U.S. telecom firms passed the final hurdle.Elliott has three key strategies that it hopes SoftBank can implement to boost the stock: a $20 billion share buyback, more independent directors, and better corporate governance, especially with regard to its investments.SoftBank’s press release on the governance, though, looks to be lip service rather than any kind of deep-seated reform. The four paragraph statement used the term standards eight times, but doesn’t actually detail what they are. We’re required to have faith that they exist and are robust. This new corporate governance policy wasn’t mentioned in the 83-page financial statement, and Son didn’t provide any details during two hours on stage. It wasn’t until two minutes from the end of Son’s set remarks that he even acknowledged Elliott, and then not by name but merely as “an activist investor.” He used the reference simply as proof that his pet peeve — that SoftBank’s share price severely lags its book value — was shared by others.Only during the Q&A session did Elliott’s name first get mentioned  — by a reporter. Son’s response, and many that followed, were consistent in dodging not only Elliott’s core demands but in recognizing that the U.S. fund even had a valid point. He demurred on the topic of buybacks, noting that they'd been done in the past. He claimed to have had plans to appoint more independent directors even before Elliott brought it up. He indicated that improving standards was already on the radar.Investors hoping for some contrition after the WeWork disaster — which saw SoftBank bail out the office rental company after an aborted IPO — would be sorely disappointed. Anyone believing that Son might suddenly discover the importance of enhanced management standards is naive. In his own words, corporate governance of startups is exercised by simply not investing in a problematic company.About the closest Son got to acknowledging any weaknesses in his strategy of making huge bets on unprofitable companies in the hope they’ll come good was to admit that he’d dialed back the size of the planned $108 billion SoftBank Vision Fund 2  — a possibility I foreshadowed last month. Smaller and more circumspect bets may now be on the table.Even before this second act, investors will need to contend with the more immediate fact that the Alibaba IPO was a one-time bonus, while the rest of SoftBank’s portfolio is at the mercy of stock markets at a time when the coronavirus epidemic is sending share prices on a roller-coaster ride.So while people may have high hopes about the role Elliott could play in spurring SoftBank to change its ways, they ought to take note of the fact that Son barely utters the name.To contact the author of this story: Tim Culpan at tculpan1@bloomberg.netTo contact the editor responsible for this story: Patrick McDowell at pmcdowell10@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.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.

  • Exit of Indonesia’s Tech Whiz Kid Is a Warning to Startups
    Bloomberg

    Exit of Indonesia’s Tech Whiz Kid Is a Warning to Startups

    (Bloomberg) -- Achmad Zaky spoke with unusual candor after taking the stage in Jakarta that October afternoon. People stopped chattering and lowered their phones when he began recounting the decade he spent building one of Indonesia’s most successful startups. What none of the hundreds in the cavernous hall knew then: it was his last big public act as chief executive of Bukalapak.com.Unbeknownst to the crowd, the 33-year-old self-taught computer whiz was on his way out. After a series of failed experiments and missteps -- including an abortive attempt to go toe-to-toe with Alibaba-backed rivals -- Zaky had lost his board’s confidence that he could lead a vastly expanded company into its next phase of growth. Just months away from ceding the reins of the $2.5 billion e-commerce outfit he built from the ground up, he spent much of the speech reflecting on his decade-long stewardship.“I’m not smarter than you. My success rate is maybe 10%,” he told the now-silent audience. “Back then, I was an engineer focusing on the product,” he added. As the company grew, “I was thinking I have to be a leader.”Yet some of his backers had doubts Zaky was the right person to lead Bukalapak given its current complexity, people familiar with the matter said. That may surprise industry observers for whom Zaky’s name had become synonymous with Indonesian e-commerce. He acquired something akin to folk hero status because, unlike many fellow founders, the self-effacing executive from a Java village made it big without Ivy League degrees or billions from the likes of SoftBank Group Corp.His departure in January sent a signal to Southeast Asia’s largest startups, which unlike Silicon Valley remains largely founder-driven. From Grab’s Anthony Tan and Tan Hooi Ling to Tokopedia’s William Tanuwijaya, they rode a funding boom fueled by a mobile explosion to create some of the world’s largest tech startups. But they also burned enormous amounts of cash in pursuit of growth. Now that economic uncertainty is squeezing funding and WeWork’s epitomized the perils of placing expansion above profitability, the time has come for corporate mavens to take the reins, some argue.“It’s the coming-of-age” of Southeast Asia’s tech scene, said Paul Santos, managing partner at Singapore’s Wavemaker Partners. “It’s the end of an era of unbridled ambition and hopefully the beginning of a period of sustainable growth.”Read more: Indonesia’s Newest Unicorn Now Wants to Take on the Big BoysZaky is only the second founder-CEO to leave a Southeast Asian unicorn, following Gojek’s Nadiem Makarim, who became Indonesia’s education minister. While the former’s departure seemed sudden, it was the culmination of a gradual separation, the people said, asking not to be identified discussing internal matters.Some of Zaky’s decisions rankled investors. Bukalapak -- which means “open a stall” -- succeeded by becoming the go-to bazaar for shoppers seeking bargains. But a few years ago, in his zeal to bring more mom-and-pop stores into the network, Zaky pushed too hard for ever-lower prices, disrupting market pricing and upsetting some consumer brands, they said.Later, as Bukalapak expanded, Zaky grew ambitious and tried to take on rivals like SoftBank-backed Tokopedia and Alibaba Group Holding Ltd.’s Lazada by flogging pricier goods. Bukalapak backtracked when it realized it was getting too far away from its roots. Then in 2019, he incensed followers of popular Indonesian President Joko Widodo after tweeting that the government was spending too little on R&D and suggested a new leader might beef up the budget: UninstallBukalapak becoming a trending topic on Twitter.Discussions about a changing of the guard began long before that. Zaky had talked with his board about wanting to pursue his passion of helping young entrepreneurs. But that coincided with increasing pressure for the startup to turn a profit, one reason why it announced 10% job cuts. Directors felt that, while Zaky had been instrumental in Bukalapak’s early days, the company had outgrown him and proposed bringing on an experienced executive. In December, the board appointed a successor in Rachmat Kaimuddin, a former director of finance and planning at PT Bank Bukopin that Zaky himself and a co-founder recommended.“As startup capital raising and profitability come under pressure, we should expect to see more CEO exits. Not just for under-performance, but for other reasons that were ignored under hyper-growth,” said Suresh Shankar, founder and CEO of Singapore-based Crayon Data. “Travis-like (behavioral), Adam-like (financial engineering) or Moonves (CBS, alleged sexual misbehavior) exits will become more common. Sometimes one of these causes or the other will be used as the excuse, to make company under-performance seem more palatable.”Unlike Uber’s Travis Kalanick, Adam Neumann of WeWork or CBS’s Leslie Moonves (who denied allegations of impropriety), Zaky leaves Bukalapak with his reputation largely intact. He will remain an adviser to Bukalapak while chairing his own foundation to support startups.Read more: Indonesia’s Newest Startup Unicorn Taps Mom-and-Pop StoresBorn in central Java in 1986 to school teachers, Zaky got his first PC (an Intel 486) from his uncle at the age of 10 -- the only one in his village. By the time he got to high school, he was competing in national competitions, and eventually enrolled in the prestigious Bandung Institute of Technology. There, he met Nugroho Herucahyono, with whom he started Bukalapak in his dorm room. College friend Fajrin Rasyid left Boston Consulting Group to join them in 2011.By the end of the first year, they’d run out of money and considered throwing in the towel. Then a chance meeting with Japanese venture capitalist Takeshi Ebihara revived the startup (Zaky tagged along with a friend to a meeting.) To his surprise, Ebihara offered to invest in Bukalapak. He also provided early guidance to the founding team.One of the lessons was the importance of control. Zaky was cautious about raising too much money to avoid dilution. While Tokopedia and Grab raised billions, Bukalapak raised less than $500 million from investors including PT Elang Mahkota Teknologi, better known as Emtek, Singaporean sovereign fund GIC Pte and Jack Ma’s Ant Financial.“I want to make sure I have a large stake, like Mark Zuckerberg,” Zaky said in an interview in 2016 at Bukalapak’s offices in Jakarta, decorated with replicas of bird cages to convey the Asian bazaar aesthetic and slogans like “Get Sh*t Done.”Read more: Southeast Asia’s Internet Economy to Top $100 Billion This YearZaky’s and Makarim’s exits now presage a trend. “‘It’s not about you’,” Makarim wrote in his farewell email.In his own parting memo, Zaky counted professionalizing his company among his achievements. He recounted an incident in its early days when the website went down for days and no one was bothered. By mid-2019, when the company had 2 million mom-and-pop store partners and agents and more than 70 million active users, Bukalapak had executives to run finance, strategy and operations.“I remember our early years when our management style was still ‘dormitory’ style,” he wrote. “Over time, our management has become more modern.”\--With assistance from Harry Suhartono.To contact the reporter on this story: Yoolim Lee in Singapore at yoolim@bloomberg.netTo contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin ChanFor 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.

  • A stock and a hard place: SoftBank's $150 billion Alibaba warchest in spotlight
    Reuters

    A stock and a hard place: SoftBank's $150 billion Alibaba warchest in spotlight

    SoftBank CEO Masayoshi Son threw cold water on Wednesday on the idea of cutting his firm's $150 billion stake in e-commerce giant Alibaba , after prominent activist investor Elliott Management called for big buybacks. The emergence of New York-based Elliott as a SoftBank shareholder has renewed focus on the company's 26% stake in China's Alibaba, the Japanese firm's biggest asset and Son's most successful tech bet to date. Elliott, one of the world's best known activist investors, has amassed a holding of almost $3 billion in SoftBank.

  • Softbank's Vision Fund 2 stalls as key backers opt out
    Reuters

    Softbank's Vision Fund 2 stalls as key backers opt out

    DUBAI/RIYADH, Feb 12 (Reuters) - Big investors who are critical to SoftBank Group's plans for a second massive technology investment fund are refusing to take part unless the first $100 billion Vision Fund can turn around its performance, sources familiar with the talks told Reuters. SoftBank chairman Masayoshi Son on Wednesday acknowledged the lack of commitments for Vision Fund 2, but vowed to forge ahead with his investment strategy using SoftBank money. The first Vision Fund lost $2.5 billion in the quarter ended December, SoftBank reported Wednesday, largely as a result of a disastrous bet on office-sharing company WeWork.

  • Asian Markets Post Solid Gains While Experts Differ on Coronavirus Peak
    FX Empire

    Asian Markets Post Solid Gains While Experts Differ on Coronavirus Peak

    While Chinese health officials said the situation was World under control, the Health Organization (WHO) warned the epidemic posed a global threat potentially worse than terrorism.

  • SoftBank profit wiped out by Vision Fund losses, second fund scaled back
    Reuters

    SoftBank profit wiped out by Vision Fund losses, second fund scaled back

    Quarterly profit at SoftBank Group Corp was almost wiped out as the Japanese technology giant was hit for a second straight quarter by losses at its $100 billion Vision Fund. Wednesday's dismal results could further dampen investor enthusiasm for founder Masayoshi Son's big bets on untested start-ups. While Son told a news conference SoftBank had turned a corner, he also said he has been forced to scale back a second Vision Fund while investing with only SoftBank's own capital.

  • SoftBank Stock Surges 14% After Sprint Sale Wins Approval
    Bloomberg

    SoftBank Stock Surges 14% After Sprint Sale Wins Approval

    (Bloomberg) -- Masayoshi Son is finally getting some good news.After a punishing year, the founder of SoftBank Group Corp. won approval for the sale of his Sprint Corp. to T-Mobile US Inc., a long-delayed acquisition that had been fiercely opposed by states including New York and California. The deal would extract the Japanese billionaire from the cash-draining U.S. wireless business and remove about $40 billion in net debt from his balance sheet. Sprint shares rose 78% in U.S. trading Tuesday after a federal court approved the deal, while SoftBank’s stock surged 14% in Tokyo.Son has been struggling to regain his footing after the meltdown at WeWork last year. Following the co-working startup’s failed initial public offering, he suffered setbacks at portfolio companies, including Wag Labs, Zume Pizza and Brandless Inc. The U.S. activist investor Elliott Management Corp. just took a stake in SoftBank, arguing its shares are undervalued.The Sprint sale helps Son in several ways. SoftBank will no longer face the risk of having to fund the wireless operator, a huge debt load will move off its balance sheet and Son will have more flexibility in raising capital for a share buyback or for his planned second $100 billion investment fund. Son will also have something to talk up to investors when he reports financial results on Wednesday.“This is obviously great news for Sprint,” said Kirk Boodry, an analyst at Redex Holdings who writes for Smartkarma. “It is better news for SoftBank.”SoftBank shares’ jump is the most in a year on an intraday basis, pushing the company’s market value to more than $110 billion. Son’s net worth rose more than $2 billion to $18.9 billion, according to Bloomberg Billionaries Index calculations.The stock has gained about 20% this year including today’s increase.The terms of the T-Mobile deal are likely to be revised because the original deal has expired, Boodry said, which means SoftBank may end up with a smaller stake in the combined company. But SoftBank won’t be on the hook for what Boodry estimates would be a potential $5 billion to $10 billion in capital investments. The two companies said they plan to close as soon as April 1.SoftBank Group is expected to return to profitability in the December quarter after reporting a loss of more than 700 billion yen ($6.4 billion) in the previous quarter, including the writedown at WeWork. Still, operating profit is projected to fall about 20% to 345 million yen, according to estimates compiled by Bloomberg.In recent years, Son has overhauled his company to focus on startup investments and shift away from the more traditional telecom business. He set up the $100 billion Vision Fund in 2017 with the goal of becoming the biggest investor in technology. He even sold a stake in his Japanese wireless operation to public shareholders so he could focus on deals. For several quarters, his performance seemed strong as startup valuations rose and SoftBank regularly booked gains.But Uber Technologies Inc., one of SoftBank’s biggest bets, stumbled as it went public last year. Then WeWork’s valuation crashed from $47 billion to less than $8 billion. Public investors suddenly turned their backs on the fast-growing, money-losing startups that SoftBank had favored.In taking its stake, Elliott has urged SoftBank to buy back its shares because of their discount, arguing it could spend as much as $20 billion by trimming investments in companies like Sprint and Alibaba Group Holding Ltd. The New York hedge fund also wants SoftBank to boost the independence and diversity on its board and bring more transparency to its investment approach.Son is still determined to raise a second Vision Fund, originally targeting at least $100 billion. His early backers are reconsidering their commitments. But SoftBank has weighed contributing $40 billion to $50 billion, people familiar with the matter have said.With the Sprint sale heading for completion, Son would have more flexibility with his finances. The deal won’t bring in capital because SoftBank’s Sprint shares will be converted into stock in the combined entity. But he will be able to borrow against the equity, which is likely to be worth more given the early share reaction.“It certainly changes the conversation,” said Chris Lane, an analyst with Sanford C. Bernstein. “This is the first piece of good news in quite a while.”(Updates with share price from second paragraph.)\--With assistance from Pei Yi Mak and Andrew Heathcote.To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Takahiko Hyuga in Tokyo at thyuga@bloomberg.netTo contact the editors responsible for this story: Edwin Chan at echan273@bloomberg.net, Peter ElstromFor 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 stock surges to seven-month high after judge OKs Sprint-T-Mobile merger
    Reuters

    SoftBank stock surges to seven-month high after judge OKs Sprint-T-Mobile merger

    SoftBank Group Corp stock surged to its highest price in over half a year in Tokyo on Wednesday, after a U.S. federal judge rejected an antitrust challenge to the proposed takeover of subsidiary Sprint Corp by T-Mobile US Inc . The ruling brings the Japanese technology conglomerate a significant step closer to slashing its exposure to a troubled asset at a time when other major bets face investor scepticism, and as it struggles to find backing for a successor to its $100 billion (77.13 billion pounds)Vision Fund. "This is obviously great news for Sprint... It is better news for SoftBank," analyst Kirk Boodry at Redex Holdings wrote in a note on the Smartkarma platform.