SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil
bloomberg.com
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I don't think these two really belong together. We is probably worth nothing, and even that might be generous. Uber is worth billions with the only real debate being how many billions.
Assuming Uber ever turns profitable.
If Lyft died and could raise prices perhaps as it stands now they are not worth billions because of debt/losses.
Certainly not Softbank's valuation-levels of worth, but it's still not nothing.
They do own a relatively small amount of property, like their partial ownership of the Lord and Taylor building, which for reference is now considered a huge mistake (it's bleeding money).
The real economic loss may be much higher.
https://www.iasplus.com/en/standards/ifrs/ifrs13
No anchor links on that page, so I'll just quote some snippets here:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs inputs are unobservable inputs for the asset or liability. [IFRS 13:86]
Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. An entity develops unobservable inputs using the best information available in the circumstances, which might include the entity's own data, taking into account all information about market participant assumptions that is reasonably available.
Think that's a bit of a misunderstanding of what's going on. IFRS doesn't deal with valuation methods per se. It's a principles driven set of standards. In this case that's "fair value". The valuation method would be driven by something like IPEV
http://www.privateequityvaluation.com/Portals/0/Documents/Gu...
From my (risk management) perspective and in an environment where it's usually mark-to-market and mark-to-quite-sophisticated-model, I just had to blink a few times when I learned that things like the net assets-approach (why is that even an approach) exist. I do understand that in the cases I see there would be materially no difference for the investor (small investments, large firm) when using a more advanced approach like DCF (which still hinges on a few key assumptions).
Company, accountant, valuation committee, valuation team, investment advisor and possibly external administrator all sorta play for the same team. They collaborate to get to an approach and a number. Then the auditors roll in and check whether they think the approach is reasonable, assumptions are reasonable and calc was done right. If they don't like it they might force a change.
What's acceptable driven more by industry specific norm than anything hardcoded. So I might be looking at two similar debt contracts but do something wildly different because the one is back by real estate deeper in the structure while the other is part of a private equity structure.
Not really something an outsider can easily look into - cause it's often in the context of a interlocking web of controls - that again differ by entity/sector.
DCF - yes, though more complex isn't necessarily more accurate. In fact I dislike it because it's so easy to manipulate & difficult to call bullshit on.
>net assets-approach (why is that even an approach)
It depends on what in it basically & how those in turn were valued. Plus nature of the entity - for income/cash generating entities you do something like DCF or EBITDA peer multiple instead.
A real economic loss is a realized loss. As long as Uber and WeWork are not closed down, their future performance is hard to predict. Uber especially is not a bad company. I love them. And if you have used Uber you ask yourself, how could you have tolerated the taxi clusterfuck so long.
As to a financial analysis of Uber, you're confusing some things. Uber did invent the summon-a-limo-with-your phone thing, so they get credit there. They didn't invent the rideshare model, but they did raise the most money to crush their competition and they were the most aggressive about committing crimes, so they currently have the biggest market share.
But all of that's ancient history. The real question for financial valuation is whether they can sustain that business once they stop burning investor money to get ahead. And I think there's good reason to believe that it will never be a particularly profitable business. Since Uber's valuation is built on being able to one day extract oligopoly rents from a large sector, it's perfectly possible that 10 years from now they'll be the next Groupon: once the new hotness, but with the stock now trading at 10% of its peak.
Why an investor would love this arrangement is not clear to me.
The SoftBank playbook has an even bigger negative impact on employees. They are granted options at an inflated price. When the stock collapses (Uber, WeWork, Wag) they lose more than others because most of the comp is in equity.
As an employee, I would stay far away from any SoftBank funded company.
He was highly successful with his speculative trades, but eventually things got out of hand and he was having to make bigger and bigger gambles to try to recover the lost money, until it all fell apart on him.
You can talk about being a fund with a view to 300 years of the future, but you're not going to get there if you act recklessly with the now.
But this is also a guy who fails to enforce the bare minimums for corporate governance in companies where he is the major shareholder.
Manipulating pre-IPO valuations as aggressively as they did was just insane.
Never forget the endgame was to dump it at the inflated valuation on retail investors and pension funds. This was a heist on the scale of Madoff, if they pulled it off.
Like Uber, they failed to explain away the gargantuan losses. By trying to massage the financials in full view of the public, that close to the IPO was probably what killed the IPO altogether.
I fear
The same industry that harps on about how disruptable old school monopolies are, is somehow buying into that? I don't get it.
Each of them effectively monopolized something for close to a decade.
It’s not a failed proposition; it just might be harder to pull off in some spheres than others, and harder as more money gets funneled into startups, and harder as the giants jump into your newly minted market, or acquire that new market.
Generally speaking, if you enjoy the content regularly enough please subscribe to newspapers and the like. News is dying or forced to deface itself to please ads and pageviews because people don't pay for quality content they like.
Then threw more good money after bad. And in the end ended up in a terrible position beholden to a scam artist.
But that's very different from theft. He essentially took every possible step to ensure he ended up in this position.
It's more like an inefficiency within the VC system that has been exploited and lots of money wasted, and hopefully lessons are learned. I don't think it says anything much at all about the fundamentals of the broader industry.
That cheap cash then finds it's way into assets like stocks and housing with that cheap money putting upward pressure on those assets.
In that same climate we have seen a decade long stagnation in wages, next to zero inflation and we are now entering a stagnated and slowing global economy.
With those contradictory growth signals, the real question is how long will that cheap keep flowing, as it is the only stopping those artificial asset bubbles from popping.
So I don't think the questions is will it collapse but instead when will it collapse?
Well. with ECB ending its QE program it's perhaps time to stock up some umbrellas
See Japan. Low interest rates make it easy to take on more national debt, so you do. If Japan's bond yields would rise even to 2% (a still ridiculously low yield) then 100% of their tax revenue would go to debt service. They'd have nothing left to spend on actually running the government.
"Stubborn" Germany refusing to take on ludicrous levels of debt they don't need to "grow Europe out of their troubles" is the only thing keeping Europe out of this situation.
Our trillion+ yearly deficits can't go on much longer until we end up in a similar situation.
It's not like the central banks can just realize their mistakes and get out of low interest rates.
As a side note -- I'm very interested in how Japanese banks have survived this. US banks usually make more money the higher the interest rate is. European banks have REALLY struggled in the low interest environment, and US banks were looking pretty bad even when interest rates were only at 1%. Does anyone know how the Japanese banks are surviving?
no. next year. close to the US elections.
https://www.ft.com/content/25f76710-fbde-11e9-98fd-4d6c20050...
One bad quarter for a guy that talks about 300 year timescale.
> If it's based on
Not really. Son himself got most of his money from investments into Alibaba.
What you are probably referring to is that the Saudis are large investors of the vision fund. I don't share your optimism that there won't be insanely rich people with little accountability in the centuries to come.
https://www.npr.org/2019/10/04/767379358/episode-943-unicorn...
If you corner a market space that is key for future tech then it'll be very difficult for anyone else to catch up - even if tech moves forward.
And there is plenty of capital and not many decent investment vehicles so expect Vision Fund 2 to do just fine.