Risky business
Financial fiascos at Softbank
Good morning, venture visionaries. This is your Stock Market Rundown for May 24th, 2023. Thanks for reading. Let’s get into it:
TODAY’S TOP STORY: THE SOFTBANK SAGA
Venture capital is a fickle business. One day, you’re sitting in a hot tub with Jeff Bezos at the Sun Valley conference. The next, you’re sweating through your Powerpoint presentation as you try to explain to your LPs where it all went wrong.
In the world of venture, Softbank is notorious both for its size and for its audacity. Based in Japan, the business was launched in 1981 by founder Masayoshi Son as a software distributor. By the late 90s, the forward-thinking Son expanded into internet businesses, buying profitable early stakes in Yahoo and Alibaba, and expanding into telecom.
When Softbank launched its Vision Fund in 2017, the $98 billion fund wasn’t just the largest venture vehicle of all time—it was among the most aggressive, too. Son poured billions into hundreds of startups, using what you might call a relaxed attitude towards due diligence.
Many of Son’s risky bets ended up flopping. Anybody remember Zune, the robot pizza startup? How about Wag, the “Uber of dog walking”? Failures like these led to billions in losses.
The most painful loss by far: Softbank was the biggest backer of coworking space provider WeWork, a corporate debacle that ended in bankruptcy. Son referred to the WeWork fiasco as “a stain on my life.” Well, everybody makes mistakes.
But things are looking up for Softbank. During 2023, it completed its long-awaited public listing of its chip designing unit, Arm Holdings, which has doubled in value since listing on the NASDAQ.
Plus, Softbank just reported its second straight profitable quarter—a nice turnaround after four consecutive quarters of losses. In the words of Drake: “guess you win some and lose some, long as the outcome is income.” I’m sure Masayoshi Son would agree.
SO WHAT ELSE IS GOING ON?
Ready to pay a monthly video game bill just like you pay a monthly phone bill? Microsoft is releasing the next Call of Duty as part of their GamePass subscription service in a ploy to squeeze more money out of the gamer community.
Western nations want to ban Russian diamonds, but given industry opposition, these sanctions may end up more like cubic zirconia—looks solid, but cracks under pressure.
Enraged because gouging grocery stores are jacking up food prices? Cool your jets: Federal Reserve research found rising markups were not a main driver of inflation. So much for “greedflation”.
Hershey is being sued because some of their candy didn’t look exactly like the packaging. This is like filing a civil claim against grandma because her cookies didn’t have sprinkles.
That’s it for today and for the week, my delightful friends. Have a terrific weekend, and I hope to see you first thing Monday morning for more updates. Yours in capitalism, The Axe
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