SoftBank Vision Fund plans to cut 10% of its workforce

FILE PHOTO: Japan's SoftBank Group Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, November 5, 2018. REUTERS/Kim Kyung-Hoon/File Photo

SoftBank Group Corp.’s Vision Fund is planning deep cuts in staffing after reporting about $18 billion in losses from the declining value of its startups, according to people familiar with the matter.

The reductions could affect about 10% of the fund’s workforce of roughly 500, said two of the people, who asked not to be identified discussing personnel decisions. The Vision Fund’s headquarters are in London, with additional operations in Tokyo and California. The cuts will be across all levels of staff, said one person.

A spokesman for the Vision Fund declined to comment.

SoftBank founder Masayoshi Son and his $100 billion Vision Fund changed the tech industry by handing out enormous checks to relatively unproven startups. But the fund went from SoftBank’s main profit contributor a year ago to its biggest drag on earnings. It lost 1.9 trillion yen ($17.7 billion) last fiscal year after writing down the value of investments, including WeWork and Uber Technologies Inc.

Son originally said he hoped to raise a new Vision Fund every two to three years, but he has conceded he can’t attract money now because of the poor performance. The fund, led by Rajeev Misra, operates as a SoftBank affiliate with most of the money coming from limited partners, led by Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co.

“It makes sense that SoftBank is cutting positions at the Vision Fund as they are in an extremely difficult situation, and they may start targeting highly paid workers to cut costs,” said Koji Hirai, head of M&A advisory firm Kachitas Corp. in Tokyo.

The Vision Fund grew rapidly after launch three years ago as Misra recruited scores of people from the finance industry, including many of his former colleagues from Deutsche Bank. Among its managing partners are several of the German bank’s ex-employees, including Colin Fan, former co-head of its investment banking division.

The fund also set up an unusual compensation structure that includes a $5 billion loan to employees. The debt is swapped for equity in the fund and generates profit when deals make money — and losses when they don’t, scaled by seniority, people familiar with the matter have said. The poor performance so far along with the layoffs may prompt some employees to look for other positions.

“One side-effect is that the best people at SoftBank may exit to find better funds,” said Hirai. “If so, their fund business may become even worse, sliding down from a slope.”

The Vision Fund has struggled since WeWork botched its efforts to go public last year and SoftBank stepped in to bail the company out. The Vision Fund currently manages more than 80 portfolio companies, but Son expects about 15 of the fund’s startups will likely go bankrupt while predicting another 15 will thrive.

“Vision Fund’s results are not something to be proud of,” Son said earlier this month as he announced record losses. “If the results are bad, you can’t raise money from investors. Things aren’t good, that’s why we are investing with our own money.”

The fund has already unwound some investments, including selling a nearly 50% stake in dog-walking startup Wag Labs back to the company last year. Son has said he plans to sell off about $42 billion in assets to finance stock buybacks and pay down debt.

SoftBank disclosed it’s selling shares in Alibaba Group Holding Ltd. and is in talks to sell about $20 billion of T-Mobile US Inc., Bloomberg News reported. It’s also exploring selling a minority stake in industrial software maker OSIsoft LLC that could be worth $1.5 billion.

SoftBank shares, after plummeting in March, have recovered and are little changed for the year. The stock rose just more than 1% in Tokyo trading.

One emerging question is how Alibaba — SoftBank’s most valuable holding — will be affected by the clash between the U.S. and China. A bill just approved by the U.S. Senate could force Chinese companies like Alibaba to stop trading their shares on U.S. exchanges.

“The big picture is SoftBank is caught up with U.S.-China conflict right now, and SoftBank may need to conduct a drastic restructuring if Alibaba was delisted from New York,” said Hirai. “Its main banks and the capital markets are anxiously awaiting an outcome for the situation.”

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.