SoftBank slides after WeWork bailout spurs scrutiny of high-risk investments
SoftBank Group slumped this week after the Japanese conglomerate's $1.7 billion bailout of office-sharing startup WeWork spurred scrutiny of CEO Masayoshi Son's high-risk investment strategy.
The firm's shares had fallen 6.8 percent to $18.41 in New York trading as of Friday afternoon. While SoftBank doubled down on WeWork as the company's cash dwindled and its valuation shrank to about $8 billion from $47 billion earlier this year, the Wall Street Journal reported that Son is scaling back on risky investments and focusing on improving governance of firms in which it has invested.
The CEO, who also runs the conglomerate's Vision Fund, has told staffers to push firms to generate cash, a sharp turnaround from his earlier directive that they spend aggressively to drive up sales, the Journal said, citing unnamed current and former executives.
Managers have also been asked in recent weeks to make lists of weaker employees, possibly a buildup to layoffs at the fund, which has simultaneously reduced hiring, people familiar with the plans told the Journal. Both are moves the fund hasn't made before, the publication said.
SoftBank agreed earlier this week to provide $5 billion in new financing to WeWork, buy up to $3 billion of outstanding shares and speed up an existing plan to provide $1.5 billion in funding. Under the pact, WeWork appointed SoftBank Chief Operating Officer Marcelo Claure as its executive chairman, while former CEO Adam Neumann was offered a $1.7 billion payout.
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Claure afterward defended the payout, arranged amid looming layoffs, and emphasized that WeWork now faces "zero risk" of bankruptcy, according to a report from Reuters.