SoftBank Group needs to cut and run on its entire WeWork investment, not just the shares. Covid-19 and the economics of a prolonged crisis necessitate strict pragmatism.
After a $1.5bn lifeline late last year, the next step in SoftBank’s bailout of the office rental company — predicated on completing the share purchase — was to be a further $5bn in debt financing. With WeWork bonds trading at about 36c on the dollar and the global economy in upheaval over the coronavirus pandemic, there’s no price in the world that could have made SoftBank’s double-down on the shares look smart. Pouring $5bn into WeWork debt would be a poor use of its funds.Last week, Moody’s Investors Service cut its debt by two notches, citing SoftBank’s planned offload of assets that amounts to little more than a fire sale.
Despite a broad portfolio that includes its stake in the Vision Fund, its domestic telecoms operator, a US telco, and a semi-conductor company, the only asset SoftBank has of significant value is its 25% stake in Alibaba Group. Those shares aren’t very liquid and could take months to sell. Son doesn’t have time. Many Alibaba investors believe that the e-commerce company has got through the worst of the Covid-19 crisis and will benefit from a return to normalcy in China.
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