When an investor is successful over a long period of time, money flocks to the fund, because we all believe the people behind the fund can repeat their success again. One of the most successful investor has been Masayoshi Son and SoftBank Group Corp. Anyone who has taken an Uber, sent a Slack message or worked at We Work has put money into SoftBank.
In an article by Peter Eavis and Michael J De La Merced of the New York Times News Service examined the latest going of Mr. Son. SoftBank made a large investment in Alibaba Group Holding in China and earned over $100 billion. Mr. Son is looking to build a new fund called a Vision Fund to invest in artificial intelligence, robotics and other advanced technologies.
The issue is WeWork was going to do a IPO in the area of a valuation of $47 billion, the market has examined WeWork and suggest it is worth $15 billion at best. If the IPO goes forth at $15 billion, SoftBank would need to take a $2 billion writedown rather than a $30 billion profit. Quite a change, which is the reason why the founder of WeWork has stepped down.
SoftBank is the largest cellphone companies in Japan. and owns Sprint in the US which was purchased for $21.6 billion. Sprint and T Mobile recently received approval to merge. Mr. Son wants to take on Verizon Communications and AT&T, it is a huge uphill battle.
Analysts say one of the biggest problems for SoftBank Group is that its enormous investments in startups have pushed up valuations for young companies that no other investors are willing to pay. WeWork is the the prime example, how does the company make a profit? and if there is a downturn in the economy will people pay premium rates for office space or will office rates fall?
Linking to dividend paying stocks, the great thing about these stocks is you can easily determine how they make a profit. Then you can go through various scenarios if they will continue to make a profit to pay the dividend. The reason why although every business can be complex, bring it to the simplest reasons. If those reasons can, you can look for alternatives.
There are more questions than answers, till the next time – to raising questions.