Daily Management Review

Softbank’s China Bets Add To Its Other Global Woes


12/15/2019




Softbank’s China Bets Add To Its Other Global Woes
The lackluster performance of the Chinese companies in which Japanese investment conglomerate SoftBank had invested in has added to the woes of the company that it has faced with some of its other best in the west such as Uber and WeWork
 
While its massive Vision fund has apparently run into trouble, SoftBank CEO Masayoshi Son is also under fire for allegedly making bad judgement and decision and nit undertaking sufficient due diligence before investing.
 
One of the SoftBank’s pride investments was the United States based office space sharing company WeWork that failed to launch its IPO and had ot be bailed out by a rescue package by SoftBank last month. 
 
The story for SotfBank is not very different in its Chinese investments too. 
 
$550 million as a cornerstone investor was ploughed in ZhongAn Online P&C Insurance Co Ltd's, by SoftBank. However some investors believed that the deal was overvalued and now the shares of the company are trading at about half the price that was accorded to it at its IPO launch. 
 
The unlisted companies in which SoftBank had invested are also in trouble. 
 
For example, an investment of $1.5 billion was made by SoftBank’s Vision Fund in Guazi.com, second-hand car dealing platform, in February thus valuing the company at over $9 billion. However the company failed miserably during its latest funding round worth $500 million in the first half of the year. The company failed to secure the target it had set for out to achieve. Reports quoting sources also said that the valuation of the company was too high and investors were unconvinced about the company not being able to make profits amidst a declining sale sector.
 
Talks for new funds were advanced, Guazi.com said in a statement, and added that the investors included the Vision Fund and other top international investment institutions. It also said that it would become profitable in the fourth quarter.
 
According to analysts, a sharp slowdown in economic growth and trade war with the United States has hurt the Chinese companies in which SoftBank had invested.
 
However, a section of investors and some bankers aware of Chinese corporate developments, many view the involvement of SoftBank as a red flag about a company possibly being overvalued even though such involvement was once a sign of promising prospects.
 
"SoftBank has become a signal that the market has peaked," said one source involved in the OneConnect IPO was reported saying in the media.
 
There was no comment available from SoftBank.
 
On the other hand, the fallout from the U.S.-China trade conflict is also threatening some of the other Chinese bets such as TikTok owner ByteDance and artificial intelligence firm Sensetime. Sources have said earlier that roughly $1 billion have been invested in both by the Vision Fund.
 
A review of whether the manner in which it handles US customer data and whether it is threat is to US national security is ongoing against ByteDance.
 
In October, Sensetime was essentially banned in the US after it was added to the so called "entity list" thereby barring the company from doing any business with any American company without prior approval from the US government. The allegations against the company were that it was involved in human rights abuses in China's Xinjiang province.
 
(Source:www.nasdaq.com)






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