Back in October, in the aftermath of the historic WeWork fiasco, we asked if the company’s new majority owned and anchor investor SoftBank is the bubble era’s (that would be now, for those unclear) short of the century.
While that thesis has yet to play out especially since the post-WeWork period was marked by another major reflation of asset bubbles courtesy of the Fed’s QE4 and the return of the ECB’s own QE, it appears that one by one the rats are starting to leave the sinking ship.
According to the FT, the US head of SoftBank’s $100bn Vision Fund is leaving after expressing concerns about “issues” at the technology conglomerate, which as regular readers know all too well, has suffered a string of setbacks over the last year, not only its catastrophic investment in WeWork, but disappointing returns on both Uber and OyO.
Michael Ronen, who as luck would have it is a former Goldman banker who joined SoftBank in 2017, told the Financial Times he had been “negotiating the terms of my anticipated departure” for several weeks. Ronen was the managing partner of its US investment office and in charge of the Vision Fund’s US investments, “leading its bets on transportation and logistics start-ups such as Getaround, GM Cruise and Nuro. According to the FT, Deep Nishar, a former LinkedIn and Google executive, and Colin Fan, a former Deutsche Bank executive and close associate of SBIA chief Rajeev Misra, are likely to take on Mr Ronen’s responsibilities in the Americas.
Ronen departure comes as SoftBank has failed to raise any outside investment for the company’s second Vision Fund, the FT notes.
He is not the only one expressing doubts about the fate of what until recently was the world’s most generous investor in startups: SoftBank is also in discussions about Ron Fisher’s future at the company, according to FT sources. Fisher, who is not a former Goldman banker, is SoftBank’s vice chairman and one of Masa Son’s “longest-serving lieutenants and was a leading advocate of SoftBank’s outsized bet on WeWork.”
Fisher joined in 1995, making him one of Son’s closest advisers, and while Son signed off on SoftBank’s $10bn-plus investments in WeWork, it was Mr Fisher who sat on the board of the co-working office-space provider and who worked closest with management on its strategy and growth plans.
So after WeWork took a multi-billion writedown on WeWork in Q4, one can see why he may be concerned about his future there, even though a SoftBank spokesperson told the FT, Fisher was “a valued member of the SoftBank family” and was “not going anywhere.”
Yet while Ronen and Fisher’s future is nebulous at best, a far bigger question is what happens to the man at the top: after a series of catastrophic investments shook confidence in the Vision Fund, founder Masayoshi Son has struggled to raise any outside capital for its sequel fund.
As a reminder, last July Son unveiled a roster of investors including Apple, Microsoft and the National Bank of Kazakhstan for the fund, which he said committed a total of $108bn, even without any funding from the first Vision Fund’s largest outside backers, Saudi Arabia and Abu Dhabi. However, none of the would-be investors have yet to firm up their non-binding commitments in the second Vision Fund, even though SoftBank has provided around $5bn in backing for the second Vision Fund to begin making investments, a lot of it “extracted” from the company’s own “volunteer” employees.
Ironically, even Saudi Arabia which for years was considered the world’s dumbest money, appears to have learned its lesson about “investing” with Masa Son: after contributing $60BN to the first Vision Fund, the Gulf investors “have become worried about the perception of pouring money into SoftBank funds following several high-profile flops from the first Vision Fund”, the FT cited people familiar with the discussions.
For its part, since the pulled WeWork IPO, SoftBank has scrambled to show the world it is a disciplined investor, announcingd new management at WeWork, and pressuring other companies it has backed to cut their losses and increase their profits. Alas, the investing world has not been impressed, and SoftBank’s share price tumbled 25% since last April when it hit its highest level since the early 2000s before a string of high-profile SoftBank-backed companies had embarrassing stock market debuts, including Uber and Slack.
Luckily for Masa Son, much of its poor performance has continued to be masked by stock price gains at China’s ecommerce giant, Alibaba, which has seen its shares climb sharply and reached a market value of $600bn. SoftBank, in its best investment ever, purchased and still owns a 25% stake in Alibaba.
Tue, 02/04/2020 – 15:00
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Author: Tyler Durden