(Bloomberg) -- SoftBank is planning to take a writedown to its Vision Fund of at least $5 billion to reflect a plunge in the value of some of its biggest holdings, including WeWork and Uber Technologies Inc., according to people with knowledge of the matter.
The Tokyo-based parent of the $100 billion Vision Fund, which began investing in 2017, is poised to unveil the writedown when SoftBank announces second-quarter earnings on Nov. 6, said the people, who requested anonymity because the matter is private. The writedown is being driven by the Vision Fund’s holdings in ride-hailing giant Uber and WeWork parent We Co., the beleaguered co-working company that SoftBank agreed this week to rescue, they said. SoftBank’s shares slid 2.7% to their lowest since January, putting the stock on track for a fourth straight day of losses.
Uber and WeWork, once among the brightest stars in the SoftBank constellation, now number among its worst performers. Their shrinking valuations have called into question billionaire Masayoshi Son’s investment credibility at a time he’s trying to raise an even larger successor to his original mega fund. The tepid performance of ride-hailing stocks in particular has influenced the way SoftBank is thinking about valuing its investments in the sector, the people said. Public markets have not been kind to either Lyft Inc. or Uber, which has tumbled more than 25% since its May initial public offering.
That has led the Vision Fund to reassess its recorded valuations of other ride-hailing companies, such as Didi Chuxing and Grab Holdings Inc., said the people. Between June 30 and Sept. 30, the value of SoftBank’s 13% stake in Uber decreased by about $3.5 billion, according to Bloomberg data.
The writedown could be as high as $7 billion, but the amount has not yet been finalized and could still change, one of the people said. That surpasses some market projections: Mizuho Securities analyst Yusuke Hori has estimated declines in portfolio companies could force SoftBank to book as much as a 500 billion yen ($4.6 billion) valuation loss. Representatives for SoftBank and the Vision Fund declined to comment.
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The Japanese conglomerate is due to report results in two weeks, when investors will zero in on how the WeWork deal affects its finances. SoftBank has said it didn’t get a majority of voting rights, meaning its troubled investee will be treated as an associate, not a subsidiary-- potentially keeping its balance sheet free of some $22 billion of debt and $47 billion in looming lease-payment obligations.
“Eventually this is going to come back to haunt them,” said Amir Anvarzadeh, a market strategist at Asymmetric Advisors Pte. “The market is just not in the mood to offer money-losing unicorns the kind of money SoftBank was willing to pay.”
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The news of the writedown comes as SoftBank courts prospective investors for its second Vision Fund, which it has said it hopes will be even bigger than the first. The original Vision Fund -- in large part backed by SoftBank, Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co. -- had made 83 investments by June 30, according to an August disclosure.
The scale of those bets was big enough to change the way the Silicon Valley startup ecosystem operates. The Vision Fund disclosure showed that the fund had made cumulative investments of $71.4 billion, and had combined unrealized and realized gains from investments and related hedges of $20.2 billion; a year-on-year jump from $30.9 billion in investments and $5.2 billion in cumulative gains.
Softbank Vision Fund’s sprawling portfolio spans numerous industries but has been dominated by transportation and logistics bets, with $28.3 billion of its total investments dedicated to this sector as of June 30. These were held at a fair value of $33 billion at that date. Its $8 billion worth of real estate investments in companies including WeWork, Compass and Opendoor were marked at $9.9 billion as of June 30. The Vision Fund’s exposure to WeWork is less than that of its parent, SoftBank.
(Updates with shares from the second paragraph)
--With assistance from Sarah McBride and Pavel Alpeyev.
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