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SoftBank Group forecasts $7-billion full-year net loss

TOKYO: Struggling Japanese conglomerate SoftBank Group on Monday forecast a $7-billion net loss for the year ended March due to the negative impact of coronavirus and losses related to WeWork.

The telecoms and investment giant, led by flamboyant entrepreneur Masayoshi Son, said in a surprise press release it also expected to suffer an operating loss of 1.35 trillion yen or $12.5 billion.

The firm cited a 1.8- trillion yen loss at its SoftBank Vision Fund, blaming "the deteriorating market environment" in the wake of the global coronavirus pandemic.

As well as killing more than 100,000 people globally, the virus has tipped the world into what many predict will be a Great Depression, and markets have been in free-fall, battering the group's investments.

Under Son's leadership SoftBank Group has morphed into an investment and technology firm, and its $100-billion Vision Fund has taken stakes in some of Silicon Valley's hottest start-ups.

The company and its Vision Fund have been aggressively buying the world's top tech start-ups, but some have ended up disappointing.

More recently Son has also faced criticism over his commitment to start-ups some say are overvalued and lack clear profit models.

The group last year announced its long-mooted Vision Fund 2, again targeting around $100 billion, but investors have been slower to commit this time around.

- 'Prompt information' - In Monday's press release, SoftBank said it expected a loss of 800 billion yen on investments held outside the Vision Fund, including in WeWork.

SoftBank and WeWork are embroiled in a legal battle after the US office-sharing giant accused the Japanese firm of breach of contract by backing out of a $3-billion rescue plan.

SoftBank terminated the agreement claiming WeWork failed to live up to its obligations, and cited "multiple, new, and significant pending criminal and civil investigations" surrounding the company and its co-founder Adam Neumann.

The move by SoftBank marked a dramatic turn of events at troubled WeWork, once hailed as a dazzling unicorn valued at $47 billion.

WeWork, which launched in 2010, has touted its model as revolutionising commercial real estate by offering shared, flexible workspace arrangements, with operations in more than 100 cities.

Things began to unravel last year as WeWork lost cash and cancelled its share offering, with Neumann pushed out -- albeit with a generous package.

SoftBank Group and its Vision Fund have already committed more than $14.25 billion to WeWork.

The Japanese firm explained Monday's surprise release by saying the firm wanted "to provide investors with prompt information" given the slump in the company's fortunes.

In February, the company said its net profit had plunged nearly 70 percent for the nine months to December but did not publish its outlook for the year to March 2020.

And last month, the firm announced it would sell up to $41 billion in assets to finance a stock buyback, reduce debt and increase its cash reserves after weeks of heavy losses in its shares.

The firm said it would buy back $18 billion of its stock, with the remaining money to be used on paying down debt, bond buybacks and cash reserves, setting a timetable of a year to complete the transactions.

April 13, 2020

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