SoftBank founder Masayoshi Son's dreams of a global tech empire are unraveling, as the ongoing global crisis compounds losses at his $100 billion Vision Fund and his big bets on startups are backfiring.
The dream of a worldwide tech empire under Japan's SoftBank is unravelling.
Founder Masayoshi Son built the company's $100 billion dollar Vision Fund over three years.
It became the world's biggest fund for technology.
It made bets on a spectrum of startups - from AI to ride-sharing apps.
Son staked his reputation on the Vision Fund.
Then came 2020.
More than half the fund's capital is in startups as big as Uber and Lyft, which are now struggling under the crisis.
And a Vision Fund partner speaking on the condition of anonymity says the economic hit has far exceeded what the fund expected early on.
Softbank itself has already flagged a $17 billion loss for the year.
Softbank-backed startups like DoorDash have pushed back plans to go public.
And recently - Son's quote "intuitive" bet on the office space startup WeWork spectacularly imploded.
With the Vision Fund's estimated losses analysts say its investments are now likely valued below cost.
And the troubles leave Son's onetime plans to raise a second mega-fund in shambles.
Many problems at portfolio firms like Softbank predate the crisis.
But the economic meltdown has exposed a blind spot in what critics have long called an extraordinarily risky strategy: throwing big sums into unproven businesses -- on the expectation that will help them dominate the markets.
Star up WeWork continues to flounder. In 2019 troubled start up WeWork pulled its IPO. The company reduced the size of the IPO after consumers lost interest in the company. Cofounder Adam Neumann was ousted as CEO and chairman. Real-estate veteran Sandeep Mathrani started as CEO in February. In April, investor SoftBank backed out of its plan to buy $3 billion worth of WeWork shares, including nearly $1 billion from Neumann. Two of WeWork's board members then sued the investor.
After considering a massive valuation cut to drum up investor interest, WeWork pulled its IPO in 2019. At the time, co-founder Adam Neumann was ousted as CEO and chairman. In April, investor SoftBank backed out of its plan to buy $3 billion worth of WeWork shares, including nearly $1 billion from Neumann. The novel coronavirus COVID-19 pandemic has done no favors for the company.
California's Public Utilities Commission made an order Tuesday regarding Uber and Lyft drivers. All drivers are "presumed to be employees" under AB-5, the state's new gig work law. The agency said they must now comply with existing regulations related to employees. The ruling is a significant defeat for Uber and Lyft, which had argued publicly and in lawsuits. Their argument was that their drivers were properly classified as independent contractors.
Reuters Lyft said some cities were starting to see significant rebounds following the coronavirus' decimation of ride-hailing requests. Overall, US rides were up 26% in May compared to April, with some cities like Austin, Texas up as much as 73%. Shares of Lyft rose about 4% in after-hours trading as investors welcomed the rebound. Visit Business Insider's homepage for more stories.
Uber and Lyft said they'll suspend rides and deliveries in cities where curfews are issued. Over the weekend, Uber temporarily shut down in parts of country says Business Insider. California, Minnesota, New York City, Los Angeles, Washington D.C. and others have enacted curfews. Rentable scooters have also become a mainstay of protests. Lime says it's removing vehicles from select cities. The companies hope to discourage people from using their companies to get to protests.
The NY Times and Business Insider report that Uber is holding acquisition talks with food delivery startup Postmates. Earlier this year Uber was reported to be holding acquisition talks with Grubhub. But those talks reportedly fell through. In mid-June Grubhub announced it was merging with Just Eat. Postmates is smaller than Grubhub, and would be more amenable to a take-over.
Just Eat Takeaway, a food-delivery service based in Europe, bought Grubhub. According to Gizmodo, while sales have spiked, operation costs have also been high. The acquisition of Grubhub makes it the largest digital food delivery service operator outside of China. Stories analyzing the deal pointed out a European deal was less likely to get blocked by antitrust regulators. Before Just Eat Takeaway acquired Grubhub, Uber wanted to also buy the food-delivery service.
Travis Kalanick is the founder of Uber. He was recently kicked out of the company. Business Insider reports that Kalanick founded CloudKitchens, a delivery-only restaurant operation. Kalanick says the company is the victim of arson. On Twitter, the company said two fires were started. They posted video evidence of the intruders. The company is worth more than $7 billion. It's funded from Kalanick's Uber wealth as well as Saudi Arabia.
CNBC reports that Instacart is raising $225 million. That boosts its valuation from $8 billion in 2018 to $13.7 billion. The company plans to use these new funds to support its partner grocers and shoppers, who fulfill orders for customers. They are also planning to improve conditions for its shoppers. DoorDash is also close to raising funds at a $15 billion valuation. DoorDash was valued at around $13 billion in 2019, according to The Wall Street Journal.