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Japanese investment group Softbank reported on Wednesday that it had lost nearly $6.5 billion on Uber, WeWork, and other companies in its portfolio for the quarter ending September 30. The quarterly operating loss is the first the firm has posted since 2005. The 704.4 billion yen loss almost wholly negates the 705.7 billion in profit the company reported last year.
The failure of WeWork caused the most considerable portion of the damage, accounting for a net loss of about 497.7 billion yen ($4.6 billion). The co-working startup's valuation was $47 billion in January but has plunged to $7.8 billion as of the end of September.
SoftBank has sunk nearly $20 billion into WeWork, including a $9.5 billion rescue package handed to it in October, giving the firm an 80-percent hold on the startup. Despite the large stake, WeWork remains an associate rather than a subsidiary, which is good for SoftBank since it will not have to take on the startup's already sizable $22 billion in debt and $47 billion in leasing obligations.
The investment giant's billionaire founder and chairman Masayoshi Son footed some of the blame, saying, "There was a problem with my own judgment, that's something I have to reflect on."
The implosion comes as Son is trying to raise a second investment fund to rival the company's current $100 billion Vision Fund, which is the largest startup investment pool in the world.
The Vision Fund also posted a loss of about 970.3 billion yen despite a 9.8-percent gain in valuation over acquisition costs of the 88 investments in the pool. Of the 88, 25 companies have made gains while another 25 saw their valuation decrease.
SoftBank posted unrealized losses of 537.9 billion yen in several investments in its portfolio, including WeWork and Uber. Bloomberg reported analysts predicted red ink for the firm in the tune of $5 billion to $7 billion, mostly due to the steep drop in WeWork's valuation.
"Son's handling of WeWork raises some fundamental questions about his investment strategy that need to be addressed," Jefferies Group senior analyst Atul Goyal said before the earnings release posted. "There will be more failed investments in the future, how does he plan to handle them?"
Bloomberg notes, Son went on to point out that despite predictions, investments like Slack Technologies, and Uber have proven profitable bets for investors despite acquisition costs and falling valuation in public markets.
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