Alibaba's Jack Ma leaves SoftBank as company posts $17.7bn loss and plans share buyback

The Japanese conglomerate will appoint a university professor who will become its only female board member

SoftBank Group founder and CEO Masayoshi Son and Alibaba founder and former chairman Jack Ma attend the Tokyo Forum 2019. Mr Ma is leaving the board of the Japanese group. Reuters

SoftBank Group doubled the amount it plans to spend buying back shares and announced changes to its board, including the resignation of long-time director Jack Ma.

The company plans to repurchase as much as 500 billion yen ((Dh17.2bn / $4.7bn) worth of its own stock by March 2021, it said in a statement. That’s on top of an equally sized repurchase it had announced in mid-March.

The Tokyo-based company also announced several changes to its board, including the departure of Mr Ma, the co-founder of Alibaba Group Holding. Three new directors have been nominated, including chief financial officer Yoshimitsu Goto. SoftBank shares rose more than 2 per cent.

SoftBank, led by founder Masayoshi Son, is buying back shares to bolster its stock price after its portfolio of startup investments lost value. The company expects to book a record 1.35 trillion yen operating loss for the year ended March 31 when it reports financial results Monday afternoon in Tokyo. After aggressively investing in startups in recent years, SoftBank is marking down the value of stakes in companies such as WeWork, Oyo Hotels and Uber.

“The buyback announcement is a surprise, given the slew of low expectations and bad news,” said Justin Tang, head of Asian research at United First Partners.

The company said on Friday that it had bought 250.6 billion yen of its own stock since March 13 under the original re-purchase plan, about half of the 500 billion yen budget.

That first buyback, announced in mid-March, initially failed to lift SoftBank’s stock amid concerns the conglomerate’s portfolio of startups is vulnerable to the economic shock from the coronavirus pandemic. When the shares plunged more than 30 per cent in the week that followed, Mr Son took an unprecedented step to unveil a broader plan to repurchase as much as 2 trillion yen, without detailing the timing. The latest announcement is part of that broader plan.

“Mr Son is also sending a message that he is serious about funding that 2 trillion yen buyback he announced in March,” Mr Tang said.

The stock gained almost 70 per cent since SoftBank said it plans to sell assets to raise as much as 4.5 trillion yen over the coming year to buy shares and slash debt.

The company’s Vision Fund business, focused on technology investments that contributed more than half of its reported profit a year ago, has swung to a projected 1.8 trillion yen loss. The company’s overall net loss will likely reach 900 billion yen.

Mr Son’s increasingly risky bets over the past few years coincided with departures from SoftBank’s board of some of it most outspoken members. Shigenobu Nagamori, the founder of motor maker Nidec, stepped down in 2017, while Fast Retailing Co. chief executive Tadashi Yanai left last December. When Paul Singer’s Elliott Management disclosed in February that is has built a stake of close to $3bn in SoftBank, one of its requests was to increase the number of independent directors.

Mr Ma’s departure is a historic moment since he and Mr Son have sat on each other’s boards for years. Alibaba is regarded as Mr Son’s most successful investment. In addition to Mr Goto, a long-time SoftBank veteran, Lip-Bu Tan and Yuko Kawamoto will join, bringing the total of external board members to four.

Mr Tan is a founder and chairman of Walden International, a venture capital firm based in San Francisco, and chief executive of Cadence Design Systems. He holds a master’s degree in nuclear engineering from the Massachusetts Institute of Technology and received an MBA from the University of San Francisco.

Ms Kawamoto is a professor at Waseda University whose subjects include corporate governance. She holds a bachelor’s degree in social psychology from the University of Tokyo, a master’s degree in development economics from Oxford University and spent years working at McKinsey. Ms Kawamoto will be SoftBank’s sole female board member.

On Monday SoftBank said its Vision Fund business lost 1.9tn yen last fiscal year after writing down the value of investments, including WeWork and Uber.

The company posted an overall operating loss of 1.36tn yen in the 12 months ended March and a net loss of 961.6bn yen, according to a statement on Monday. The Tokyo-based conglomerate released figures in two preliminary earnings statements last month. The losses are the worst ever in the company’s 39-year history.

Mr Son’s $100bn Vision Fund went from the group’s main contributor to profit a year ago to its biggest drag on earnings. Uber’s disappointing public debut last May was followed by the implosion of WeWork in September and its subsequent rescue by SoftBank.

Now Mr Son is struggling with the impact of the coronavirus on the portfolio of startups weighted heavily toward the sharing economy. Mr Son is scheduled to hold a briefing discussing the results later on Monday.

The drop in Uber’s share price was responsible for about $5.2bn of Vision Fund’s losses in the period, while WeWork contributed $4.6bn and another $7.5bn came from the rest of the portfolio, SoftBank said. The $75bn the Vision Fund has spent to invest in 88 companies as of March 31 is now worth $69.6bn.

SoftBank also recorded losses from its own investments, including WeWork and satellite operator OneWeb, which filed for bankruptcy in March.

Last year, after WeWork’s effort to go public fell apart, SoftBank stepped in to organize a bailout and put its own chief operating officer, Marcelo Claure, in charge of turning around the business. But the pandemic has hammered its operations as workers shy away from gathering in shared office spaces.

WeWork’s valuation is now $2.9bn, down more than 90 per cent from its peak. SoftBank has invested more than $10bn in the company.

Mr Son’s investments in hotel-booking service Oyo Hotels & Homes and Uber, among the biggest in his portfolio, have also fared poorly. Oyo, in which SoftBank invested about $1.5bn, last month furloughed employees in countries outside its home market of India as it struggles to survive the virus. Uber’s shares are trading about 28 per cent below its IPO price.