💸🧨 $23 Billion Lost in 3 Months
Hey guys! Hope you’re having a great Sunday.
Did you know that today is National Creamsicle Day? Creamsicles started with the invention of the popsicle in 1905 by an 11-year-old, Francis William Epperson. He left a mixture of powdered soft drink flavoring with water overnight with the stick he used to stir the concoction. During the night, the temperature dropped below freezing, and when Francis discovered it the next day, it was frozen. That was the first Popsicle ever created. We learn something new every day :)
Anyways, this week we saw:
Amazon’s new dystopian reality show featuring Ring security cameras…
Mark Cuban and the Mavericks sued over crypto ‘Ponzi scheme’
Meet the man behind the largest VC fund in the world.
In 2000, a Japanese investor bought a $20 million stake in Alibaba, a little-known Chinese company at the time. Fast forward to today, and that stake is now worth over $34 billion and is considered one of the greatest tech investments of all time.
So who is this investor?
Masayoshi Son is regarded as one of the most ambitious investors of all time. Some notable investments that propelled him to fame included Alibaba, Yahoo, Arm Holdings, and Sprint.
Son was known to be a “grand slam” hitter and not a “first-base” hitter. He invested and aimed solely for the “grand slams”, which inevitably led to many many strikes. In fact, during the dot-com bubble, Son’s holding company (SoftBank) lost 93% of its market cap.
Nevertheless, his investing style didn’t waver. In 2017, Masayoshi Son launched his most ambitious project yet: The Vision Fund.
The Vision Fund was a $100 billion venture capital fund featuring investors such as Saudi Arabia’s sovereign wealth fund, Foxconn, Qualcomm, and Apple. The idea was to invest in companies that were building disruptive technologies or products.
And they did just that… Some notable successes over the years included ByteDance (owner of TikTok), DoorDash, Nvidia, and Uber.
But none of these successes made as many headlines as the Vision Fund’s biggest failed investment, WeWork, which was described as “an implosion unlike any other in the history of start-ups”.
WeWork is a coworking space provider with an eccentric leader, Adam Neumann.
In August 2017, SoftBank invested $4.4bn at a $20bn valuation.
In November 2018, SoftBank bought a warrant that allows them to buy up to $3bn worth of WeWork shares at a $42bn valuation.
In January 2019, Softbank invested $2bn at a $47bn valuation.
Long story short, WeWork was a disaster. A TON of wasteful spending and poor company management led to SoftBank paying Adam Neumann $1.7bn to resign and leave WeWork… Crazy, right? In the end, SoftBank ended up losing about 90% of its WeWork investment and frustrated many Vision Fund investors.
Hulu documentary on WeWork: (link)
Apple TV dramatized show on WeWork: (link)
How is Masayoshi Son doing now?
Recently, the Vision Fund has been struggling as both the public and private markets have yet to find solid footing. In the June quarter, SoftBank reported a record $23.4 billion loss with $17.3 billion of those losses coming directly from the Vision Fund.
When Son was asked to reflect on the quarter, Son said:
“There are too many [lessons] to count… We can point to a lot of reasons, but these are all excuses. We have to self-reflect about the fact that if we’d been more selective and had invested more properly, it wouldn’t come to this. ” (Source)
While the willingness to take responsibility was great to hear, more losses are likely to come. The Vision Fund was started in 2017 and has never experienced a rising interest rate environment before.
With rates rising across the world, SoftBank’s current holdings will likely continue to struggle and they’ll probably have to change their aggressive approach when it comes to giving out checks to tech companies and startups.
Over the coming years, it’ll be fascinating to see how high-profile investors such as Masayoshi Son will perform in a new investing environment.
“I always take bold moves. So it can have great returns but with great risk. We only live once, so I want to think big.” - Masayoshi Son
Charts of the Week
While Gen Z internet usage is on the rise, the Pew Research Center found that Facebook usage among younger generations has declined by ~50% over the past 7-8 years.