SoftBank’s Son Hoping ‘Winged Unicorns’ can Save Tech Empire

On Monday, Masayoshi Son, the SoftBank Group Corp CEO, pinned all his hopes on a group of ‘winged unicorns’ for saving the performance of his Vision Fund worth $100 billion. He gave few clues regarding which ones they would be. Announcing a shortfall of $18 billion at the Saudi-backed Vision Fund and a record annual loss for his tech company, Son said that all tech unicorns had gotten lost into the ‘valley of coronavirus’. Nonetheless, he said that a small number of tech companies would be able to survive and could end up accounting for almost 90% of the portfolio’s value. 

A slide accompanied his words, which depicted cartoon unicorns falling down a hole while one-winged unicorn flew to the other side for safety. Few clues were offered by the 62-year-old businessman as to which of the 88 portfolio companies of the tech conglomerate would eventually become successful. Son stated that winners during the coronavirus would be companies in online medical services, food deliveries, online shopping, and video streaming. Overall, the COVID-19 pandemic was nothing less than a disaster for the fund. According to some analysts, if Son had even a slight inkling of what these companies were, he would have pointed them out right away.

SoftBank’s exposure to areas, such as video streaming and online education is very limited and the only noteworthy exception is one TikTok parent, Bytedance. While locked-down consumers have certainly boosted the demand for food delivery, vendors have had to deal with disruptions, which include being forced to shut down. Uber and other similar portfolio firms have also been pummeled by a slump in their primary ride-hailing business. In contrast, online medical companies like Ping An Healthcare and Technology, have experienced an upswing. However, there have been questions about the broader applications of such types of healthcare technology. 

Son’s belief that a few hits can compensate for other failures is usually applicable in the early stages of investment as there is a greater potential upside. But, chances of uplift are low for the Vision Fund because it has been more focused on late-stage startups. Some analysts were quick to note that the CEO’s empire was being isolated rather quickly. Jack Ma, Son’s longtime ally is leaving SoftBank’s board and Son was forced to sell down his stake in Alibaba to fund share buybacks after being pressurized by Elliot Management, a U.S. activist fund. 

Moreover, poor performance has meant that SoftBank can no longer secure additional cash from big backers of Vision Fund like Saudi Arabia’s sovereign wealth fund. Analysts said that SoftBank wouldn’t be able to boost its market value if it doesn’t have access to any funds because they will not be able to make any investments. On Monday, Son once again said that struggling parts of the portfolio wouldn’t be bailed out even though they do have funds in reserve, which will be used for ‘follow-on’ investments. He even changed his stance on WeWork, which he had said was on its way to recovery back in November.