This article is from the public number:One point (ID:TMT08181003), OF: Yulsa, from FIG title: Oriental IC
Softbank has just experienced the worst quarterly financial performance since its inception in 1981, primarily because WeWork and Uber’s valuation/market value has shrunk.
Investors and public opinion circles have begun to question the investment model of the Vision Fund for the huge valuation of start-ups, but Sun Zhengyi stressed that his strategy of reinvesting will not be shaken.
After the WeWork storm, the Softbank Empire can still remain unsettled, but who knows that Sun Justice can still afford a few WeWorks?
The two talked very much, and Sun Zhengyi was infected by the team atmosphere led by this young man. He told the founder of WeWork: Your creativity is good, but let’s make it bigger.
-Pre-WeWork employees disclosed during interviews
Sun Zhengyi once appreciated Adam Neumann, but in the recent period, it was Adam Neumann’s company that made Sun Justice’s head burned. The shared office WeWork has fallen by 80% in the past two months, which has caused its main investor, Softbank, to suffer the largest quarterly operating deficit since its establishment.
*Sun Zheng admitted that he overestimated WeWork and Adam Neumann at a recent conference
01 Softbank’s most difficult quarter ever
The Softbank Group released its 2020 fiscal year (2019/4~2020/3) interim report, indicating that the group is experiencing company history The worst period.
In the April-September period, Softbank Group had an operating deficit of 15.5 billion yen (about $140 million), which is Softbank For the first time in the past 15 years, the group has experienced a deficit in the mid-year report.
Among them, from July to September, the vision fund business showed 97.02 billion yen (about 8.9 billion US dollars) business deficit, this is the vision The quarter in which the fund first appeared in deficit since its inception in 2017.
This resulted in the overall operating deficit of Softbank Group from July to September reaching 704.4 billion yen (about $6.4 billion), which is Softbank The worst quarter of financial performance since 1981.
The black-and-white record that Softbank Group has maintained in the past has been broken. From July to September, the operating loss reached 704.4 billion yen, or about $6.4 billion.
The Softbank Group mentioned in its corporate statement that the primary cause of the operating income deficit was the decline in WeWork’s valuation of the Vision Fund’s heavyweight investment target and the depreciation of Uber’s market fair value.
WeWork’s valuation before the IPO once reached $48 billion, but the prospectus published on August 15 this year exposed the company’s huge losses. Investors questioned the profitability of the shared-asset model, the asset-based model. Holding a negative attitude, this makes WeWoRk’s valuation has fallen by more than 80% in just over a month, currently only about $7.5 billion.
The house leaks coincided with the night rain. Uber’s valuation was as high as 120 billion US dollars. However, after the listing in May, the stock price went down one after another. The current market value is less than 50 billion US dollars. Its stock price of 27 US dollars, has been lower than the Vision Fund’s shareholding cost of 36 US dollars, which caused the Vision Fund to appear on the books.
In addition to the loss of WeWork IPO, star companies such as uber, slack and Guardant Health have also seen their share prices fall sharply in the most recent quarter.
Compared with the temporary impairment, the longer-term impact is that investors and public opinion are questioning the investment model of the Vision Fund.
Keith Rabois, a senior investor in Silicon Valley, believes that it is not a wise investment to constantly send money to a business model with a persistent deficit.
Japanese Internet tycoon 堀江贵文(LiveDoor founder, former president)Critical Vision Fund is essentially “drums and flowers”, through huge investments The bottom line to improve the valuation of start-ups, and then IPO listed “cut the leek.”
Wall Street Media said that Sun Justice should slow down his footsteps, and the Vision Fund will give huge amounts of investment to start-ups in a short period of time, which makes the valuation of start-ups forced to rise, and this estimate The value is not currently recognized by the secondary market.
Some more radical views even suggest that if the thunder like WeWork happens again and again in the future, Sun’s Softbank Empire will be destroyed.
*The Japanese public opinion community even began to discuss the possibility of Softbank failing in the future due to investment failure
However, Sun Zhengyi hopes that the market will see WeWork’s thunder as a small episode, and his investment strategy will not stop. At the press conference in November, Sun Zhengyi admitted that he had misjudged the investment in WeWork, but he still said that he would continue to launch the “Vision Fund Phase II” with a scale of 100 billion US dollars. Sun Zheng stressed that our vision and strategy of “making the world through the information revolution” will not change because of this incident.
02 Investment-based development strategy has become the DNA of Softbank
The strategy that Sun Zhengyi refers to is the DNA of Softbank now, the underlying logic of the Vision Fund “group strategy” – by investing in the head enterprises of new fields, forming an alliance of outstanding enterprises, guaranteeing each in history There are high-speed growth points in the stage alliance organization to continue the entire organization, which is the life of the Softbank Group.
*Sun Justice intends to build a company that can continue to grow for 300 years through “group strategy”
Sun’s ambition is to hope that Softbank will achieve 300 years of continuous growth through the “group strategy”.
At the end of the last century, Softbank gave people the impression of a Japanese broadband and mobile phone operator, but like the past article, “The undercurrent, who will replace Sun ZhengRighteous Softbank Empire? As stated in the article, the company is gradually becoming a reinvested international company.
The turning point of this change In 2010, the 30th anniversary of the establishment of Softbank Group, Sun Zhengyi made a difficult OKR for himself: To design a “DNA” that the group can continue for 300 years in its lifetime.
Sun Justice believes that Softbank’s communications and IT industries are changing very fast(Moore’s Law) and unpredictability for the future(Singularity Theory) Two characteristics, the probability of a company failing to be closed or acquired within 30 years after starting a business is 99.98%, which makes it necessary for a company to The idea of continuing to grow for 300 years sounds crazy, so he decided to fight against the historical laws by building a cluster of businesses.
*Group strategy with artificial intelligence as the connection point is Softbank’s current core strategy
(Source: Softbank Official Materials)
According to the concept of Sun Zhengyi, Softbank Group will grow into a network of 5,000 companies in the next 30 years. The Vision Fund is his tool to achieve this goal. A few years later, Softbank, as a correspondent, may be in a weak position, but the Vision Funds will bring Sunsoft’s next pillar business to Sun Justice, possibly sharing the economy, artificial intelligence and even biotechnology. It can be said that the investment-based “group strategy” has become the DNA of Softbank, and Sun Zhengyi has bet on Softbank’s 30 or even 300 years in the future.
As a result, the question of “Sun Justice will slow down the pace of investment” will be solved.
First, SunJustice may slow the pace of investment expansion, but “will not” stop.
In the mid-term softbank financial report briefing, Sun Zheng used the words “stable class=”text-remarks” label=”remarks”> (the general trend is abnormal) to respond to the outside world. Questioning, but also expressed that they will adhere to the “Vision Fund Phase II” plan. Because the hard-core model of “technology, capital plus monopoly” still has strong appeal, although the application tactics still need improvement, the rationality of the underlying logic of this model cannot be denied. In addition, the Internet+ and other industries invested by Sun Zhengyi have great potential in the future. It seems that Sun Zhengyi will not stop investing.
*WeWork After the storm, Sun Zhengyi believes that Softbank is not shocked at the moment
Moreover, Sun Zhengyi also “can’t” stop the pace of investment expansion.
After the WeWork event, Softbank should choose to drive down its internal investment amount in a short period of time to reduce the risk of investment. Therefore, in order to maintain the normal operation of the Vision Fund, Sun Zhengyi is eager to issue another $100 billion Vision Fund to attract head players who are willing to change the world with him and share the risks with him. But as the Wall Street Journal commented, The ultimate question facing Softbank is whether head players are still interested in continuing to follow the Vision Fund project in the short term. Once the market confidence is difficult to recover, such a decision may bring greater risks to Softbank.
03 Investing in WeWork failure will make Softbank suffer?
So without the change of the underlying strategic logic, a similar mine like WeWork will make the Softbank Group suffer. The first thing to know is that Softbank’s current finances are not as shocking at first glance.
The high valuation risks exposed by WeWork’s listing failure have scared off investors. The soft-bank vision’s “floating losses” in the investment market made Softbank’s mid-term transcripts very ugly.
However, from the financial report, Softbank is in the field of its parent communication business (including Japan’s domestic communications business Softbank, US Spring, ARM chips, etc.) Business performance is still relatively stable. Excluding the Vision Fund component of the financial statements, the operating income is black and is maintained at a stable 265 billion yen (about $2.4 billion) Operating income level.
From this point of view, in the stage when the market sentiment has not stabilized, the outside world is questioning whether it is possible to label Softbank with the “lack of vibration” label, which is still to be discussed.
The above data is from the Softbank Group Interim Financial Report. Among them, A is the operating income after the investment of the Vision Fund and the Delta Fund, which is black for 265.9 billion yen (about 2.4 billion US dollars). B is the operating income of the Vision Fund and the Delta Fund, which directly lost 970.2 billion yen (about 8.9 billion US dollars). This also directly led to the first time that C’s operating income had a deficit of 704.4 billion yen (about 6.4 billion US dollars).
However, can Softbank be able to afford a few “WeWorks”?
According to IFRS(International Accounting Standards) Document 9, a portion of the investment fund of the Softbank Group in the Vision Fund is directly calculated as a trading financial asset. Entered the operating profit of the Softbank Group’s financial report. In WeWork, energy sources continue to hold “cash” to buy land to buy buildings, and to expand the high-valued vision fund under the management of Sun Zhengyi.There is no problem when you are in the soil, and it will make the market volume of Softbank look taller and more powerful.
When such growth proves to be unsustainable, the secondary market no longer accepts the high valuations given by Softbank, and such a large market mass is immediately identified as dangerous and should be fleeing. WeWork’s thunder, which directly compensates Sun Zhengyi and its leading Softbank Vision Fund, is close to $9 billion, which proves that the valuation of the investment market has a great impact on the financial status of Softbank Group.
The above data is from the Softbank Group Interim Financial Report, which details the impact of Wework’s investment failure on Softbank’s finances. It also explains the corresponding investment accounts of Softbank Group for the amount of WeWork investment. It can be seen that the investment losses to WeWork are directly included in financial instruments and operating income.
As we all know, in order to firmly hold the controlling stake in Softbank, Softbank Group, led by Sun Zhengyi, has always insisted on bond financing. Through the analysis of the financial report data of Softbank Group in recent years, we can also find that the asset-liability ratio of Softbank Group has remained at around 70%~80%, and Sun Yizheng’s “White Moonlight”-Google’s 30% asset-liability ratio is completely unacceptable. compared to.
After looking closely, interest-bearing debt accounts for about 60% of total liabilities, and mobile interest-bearing debts increase year by year. As of September, it is about 17 trillion yen (about $155.6 billion). Sun Zhengyi once publicly stated: “The stock value currently held by Softbank Group is as high as 26 trillion yen (about 238 billion US dollars). This statement, if the value of the stock held by Softbank Group continues to fall by more than 35%, and the value of the stock market is less than the flow of interest-bearing debt, the old way of selling shares will not work. Heavy interest costs will be brought to Softbank Group