SoftBank,Vision Fund move on after WeWork fiasco, but another hit could be looming
SoftBank has reportedly continued making new investments since it planned to bail out WeWork and take control of the company, but could another of its sizeable investments be facing a similar debacle?
One of the bank's Vision Fund investments is receiving scrutiny over its practices and the health of its business. The New York Times reported this week that Oyo, an India-based budget hotel chain, has been inflating the number of rooms listed on its site and listing rooms from unlicensed hotels.
Oyo has also run into financial disagreements with some hotels over fees and amounts owed to the hotels, according to the report.
This isn’t the first time Oyo’s practices have raised eyebrows. Its founder, Ritesh Agarwal, led a $2 billion investment round into his company in July by borrowing in order to buy shares from two existing investors, the Financial Times previously reported. The price paid at the time valued Oyo at $10 billion, but the unusual financial moves drew some skepticism about the valuation, according to the report.
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Oyo bills itself as “India’s largest hospitality company” and the “world’s fastest-growing hotel chain.”
In a statement to FOX Business, an Oyo spokesperson said the company is committed to growing Oyo the right way.
“We work hard every day to ensure that our values are upheld by thousands of committed employees around the world, and we are subject to regular external audits to ensure proper compliance and adherence to our code of conduct,” the spokesperson said.
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SoftBank has invested at least $2.1 billion with Oyo over two funding rounds, according to PitchBook data.
But Oyo’s rapid growth has come with growing losses, The New York Times reported. Government filings show the company expects it’ll continue losing money through at least 2021.
For the Vision Fund, that could mean more losses on top of what it’s lost with its stakes in WeWork and Uber. Plans for a WeWork IPO were scrubbed after its valuation plummeted. And while the Vision Fund is reportedly 85 percent deployed, major investors including Saudia Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co. — which contributed close to half of the fund — haven’t thrown in on a new second fund announced last year, FOX Business previously reported.
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Still, the Japanese bank has continued making moves for the Vision Fund as it planned a $9.5 billion bailout for WeWork on top of the billions it had already invested in the office space startup. It participated in funding rounds collectively worth more than $4 billion in November and December, PitchBook reported. Those included a $1.7 billion investment in Indian mobile payment and commerce platform Paytm, a $1 billion investment in Chinese biotech firm Beike and a $700 million investment in food delivery app DoorDash, according to the report.