SoftBank more than $600 million underwater on Uber

on Sep3
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SoftBank Group founder, chairman and CEO Masayoshi Son announces his group’s earnings results on May 9, 2019, in Tokyo.

Alessandro Di Ciommo | NurPhoto | Getty Images

Uber’s plunging stock price has left its biggest stakeholder in the red.

SoftBank, which poured about $7.6 billion into Uber in early 2018 after the ride-hailing company suffered a series of bruising gaffes, has seen the value of its stake dwindle by the day. Uber shares fell almost 6% on Tuesday, dropping for the eighth time in nine trading sessions as they headed for a record low close.

The stock has lost close to one-third of its value since its May IPO.

Uber is at the centerpiece of SoftBank CEO Masayoshi Son’s plan to build up a portfolio of next-generation transportation companies that, in his view, are all moving towards a future of artificial intelligence and autonomy. While gyrations in Uber’s share price are unlikely to alter Son’s thesis, the company’s mounting losses and unclear path towards financial stability are proving unappealing to public market investors.

At under $30.70, where Uber closed on Tuesday, the stock is below the lowest point at which SoftBank invested. The Japanese conglomerate spent about $6.6 billion to buy just over 200 million shares from existing investors, including former CEO Travis Kalanick, at around $32.87 a piece. It provided another $1.05 billion in fresh capital to Uber, buying 21.45 million shares at about $48.77 each.

In total, SoftBank invested $7.65 billion. That stake, when factoring in the $245.3 million in shares SoftBank sold in the IPO, is currently worth less than $7 billion.

SoftBank bundled its losses from Uber along with other investments in its latest financial report for the three months ended June 30. The company recorded unrealized losses of 195.3 million yen (about $1.84 billion) for “the decrease in the fair values of investments in Uber and others.”

The $100 billion Vision Fund held 81 investments at the time of that report with costs totaling $66.3 billion and a current fair value of $82.2 billion, SoftBank said. It highlighted Slack, DoorDash and India’s OYO as three investments that have increased in value. SoftBank also has a massive stake in office-sharing company WeWork, which is set to go public soon and may face a similar challenge with public investors because of its high cash burn.

No seat at the table

The precipitous decline in Uber’s stock price is just the latest complication for SoftBank in relation to the ride-hailing company.

As part of its investment, SoftBank was granted two board positions at Uber, which were slated to go to Marceo Claure, the company’s operating chief and executive chairman of Sprint, and Rajeev Misra, the head of the Vision Fund. But because of an extensive assessment by the Committee on Foreign Investment in the United States (CFIUS), a unit of the Treasury Department that reviews certain transactions involving overseas investors, SoftBank still doesn’t have its board seats and may never get them.

Without positions on the Uber board, which currently has nine members, SoftBank has limited ability to wield its power and influence. SoftBank is also an investor in Uber’s separate self-driving vehicle unit, known as the Advanced Technologies Group (ATG), which raised $1 billion in April from the Vision Fund as well as Toyota and Japanese auto-parts supplier Denso. According to Uber’s IPO prospectus, CFIUS could block the agreement, leading to “mitigation measures that materially and adversely affect the strategic benefits of the ATG Collaboration Agreement.”

A SoftBank spokesperson didn’t immediately provide a comment.

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