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Tesla going all out in China Seeking AlphaView full coverage on Google News
TOKYO — SoftBank Group of Japan on Wednesday said it took a multibillion-dollar write-down related to its stakes in WeWork and Uber, two flashy technology companies that have become the poster children for the excesses of start-up culture.
SoftBank Group is the world’s largest tech investor, and it has used its $100 billion Vision Fund — backed with its own money as well as major stakes from Saudi Arabia’s Public Investment Fund and others — to become a kingmaker in the space by placing major bets on companies it believes have the potential to dominate entire industries.
But the company, and its chief executive, Masayoshi Son, have come under increasing pressure to rein in their stable of potential unicorns following the spectacular implosion of the initial public offering of WeWork, the tech-adjacent American real estate company, in late September.
On Wednesday, SoftBank said its profits for the six months that ended in September totaled 421 billion yen, or nearly $3.9 billion, about half the level of the same period a year ago. The figures imply SoftBank lost more than $6.4 billion in the most recent three-month period.
SoftBank cited a nearly $4.6 billion write-down in the value of its investment in WeWork, plus write-downs in other investments, including Uber, the American ride-hailing company.
SoftBank also owns Yahoo Japan, the chip design firm ARM, and the phone carrier Sprint in the United States.
But WeWork’s fall had the biggest impact on the Japanese company’s results. WeWork’s $47 billion valuation plummeted virtually overnight after its effort to sell shares to the public revealed deep governance issues, including questionable financial arrangements involving Adam Neumann, its leader and founder. SoftBank now values WeWork at $7.8 billion. Mr. Neumann resigned as the company’s chief executive at the end of September.
SoftBank Group bet big on Mr. Neumann’s vision even as cracks had begun to appear. While its partners in Vision Fund balked at throwing more money at the loss-making WeWork, Mr. Son’s company continued pouring funds into the venture, eventually investing $10.5 billion in the tech firm ahead of its planned offering.
The meltdown has forced SoftBank Group to pump an additional $9.5 billion into the company, leaving it with an 80 percent stake but no majority voting rights. Mr. Neumann walked away with more than a billion-dollar payout.
The WeWork fiasco has increased scrutiny of Mr. Son’s role in shaping the Vision Fund’s investment portfolio. The notoriously exuberant founder is famous for making snap decisions about companies based on intuition as much as overall strategy.
The missteps at WeWork have shaken investors’ confidence in Mr. Son, according to Mitsunobu Tsuruo, an analyst at Citigroup Global Markets Japan.
“He’s supposed to be a good judge for picking winning entrepreneurs, but Mr. Neumann was not the case,” he said, adding that Mr. Son would need to convince his shareholders that their interests will not be compromised by Softbank’s exposure to WeWork.
In some cases, Mr. Son’s bets have paid off spectacularly. An early gamble on Alibaba, the Chinese e-commerce company, grew to more than $100 billion. But other investments have not fared as well. Large stakes in Uber and Slack have begun to look more nearsighted than visionary as their share prices have fallen in the months following their public offerings.
WeWork’s collapse comes as Mr. Son is trying to raise funds for a second $100 billion-plus fund aimed at making investments in artificial intelligence, which SoftBank announced in July. The company planned to finance the fund with $38 billion of its own money and said it expected backing from some of the tech industry’s top names, including Apple and Microsoft, as well as several major Japanese financial institutions.
At the time, it seemed that money would likely finance a strategy similar to the one Mr. Son has pursued with the first fund: pumping so much money into his chosen companies that they overwhelm their rivals with their sheer financial bulk, allowing them to establish near monopolies in key industries.
Critics of the strategy say it has undermined financial discipline at the companies that benefit from the fund’s largess, and the experience of companies like Uber — which spent billions on buying market share but has yet to turn a profit — has given investors second thoughts about that model.
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SoftBank Reveals $6.5 Billion Loss From Uber, WeWork Turmoil BloombergView full coverage on Google NewsVANCOUVER (NEWS 1130) — The head of TransLink is refusing to publicly negotiate a resolution to the ongoing transit strike.
As the transit strike continues disrupting services, CEO Kevin Desmond insists the available money is limited and union wage demands must come down.
“I’m convinced we will be able to bridge the gap and the best way to do that is to get to the table and bargain hard –on both sides,” he explains, adding the gap on wage demands can be bridged if Unifor and Coast Mountain Bus Company negotiators are willing to resume bargaining.
“We have to bargain this. We have to do something that, at the end of the day, is affordable and we have to make sure that taxpayers believe we’re providing good value for money. It would be a pity if we had to –in effect– rob Peter to pay Paul and it would cost even more money at greater disruption to fix a problem that should have been taken care of through good, preventive maintenance. That costs money.”
He also defends the need for overtime saying it’s needed to keep service on schedule.
Desmond says he won’t negotiate a resolution to #transitstrike in public, but he insists wage demands need to be fair because “buckets not deep” when it comes to what @TransLink and Coast Mountain Bus Company can afford. @NEWS1130 pic.twitter.com/jS30i2pVj0
— Marcella Bernardo (@Bernardo1130) November 5, 2019
“Is it sustainable? Yes. Every transit agency I’m familiar with has that balance of overtime. I don’t have a stat for you on how much overtime. I’d say it’s a large minority of the pay that we make –that we provide to our employees,” Desmond says. “If we miss some trips if someone calls in sick and we have to bring in someone from home, they might make overtime. They might make un-scheduled overtime to do the work. Similar on maintenance.”
He adds the cost of public transit would increase if overtime wasn’t an option, especially with a shortage of maintenance workers.
“Some of it on the maintenance side is a little bit of a shortage of trade workers, that’s also endemic of our trade society. It’s not just here in Vancouver that we’re seeing that.”
This comes after Desmond was telling local business leaders about TransLink expansion plans which include eventually expanding SkyTrain service to the Fraser Valley.
OPEC admitted that demand for its oil over the next few years could be drastically weaker than it previously thought, due to a combination of a weakening economy, rising supply elsewhere, and pressure from climate activists.
In its World Oil Outlook, OPEC said that demand for its oil may only reach 32.8 million barrels per day (mb/d) by 2024, a figure that is substantially lower than the 35 mb/d from last year’s estimate. Demand is still expected to grow in non-OECD countries going forward, but OPEC admitted that demand may peak in the OECD in 2020.
Slower economic growth also factored into the lower medium- and long-term estimates. “Given recent signs of stress in the global economy, and the outlook for global growth, at least in the short- and medium-term, the outlook for global oil demand has been lowered slightly this year to 110.6 mb/d by 2040,” OPEC’s Secretary-General Mohammad Barkindo said in the report.
OPEC said that non-OPEC production continues to rise, particularly from U.S. shale, although not exclusively. The cartel has had to restrain production for several years to keep prices from crashing, even in the face of relentless shale growth. U.S. shale is growing, but is now slowing dramatically. At the same time, countries such as Norway, Brazil, Canada and Guyana are expected to continue to add supplies in the next few years. Steady supply increases puts OPEC in a bind.
Meanwhile, the attention paid to the risks of demand destruction in the OPEC report is notable. The phrase “climate change” appears nearly 50 times in the report and the cartel acknowledged that electric vehicles are “gaining momentum.”
OPEC said it was “fully engaged and supportive of the Paris Agreement,” and that there is “no Planet B.” The group reiterated the urgent need for oil-exporting countries to diversify their economies, even as there is relatively scant evidence that OPEC member countries are actually doing so. Related: Trump Vows To Protect Syrian Oil Fields From ISIS
Indeed, OPEC is not exactly preparing for the end of the oil era. It still sees demand growing by around 12 mb/d over the next two decades, a scenario that would be utterly at odds with any viable chance to head off the climate crisis.
In fact, despite all of the climate risks, all of the urges to diversify economies, the possibility of weakening demand and the competition from non-OPEC supply, the cartel still seems unbowed, at least outwardly.
As if to refute any pending doom for oil-producers, Barkindo said that while renewables lead the way in growth going forward, “oil and gas are still forecast to meet more than 50% of the world’s energy needs” in 2040. Even though the growth in consumption is slowing, “demand expands in every five-year period to the end of the timeframe,” Barkindo emphasized.
He said that the global upstream, midstream and downstream oil sectors “need” $10.6 trillion in investment between now and 2040. “OPEC Member Countries are fully committed to making the necessary investments to keep consumers well supplied,” Barkindo said.
Still, in the next paragraph, he admitted the risk at hand. “The industry is now concerned about policies that may detrimentally impact investments; for example, those related to climate-related financial disclosures.” Related: Iran’s $280 Billion Sanction Skirting Scheme
Just a few months ago, Barkindo said that the greatest threat to the global oil industry came from climate activists. “There is a growing mass mobilisation of world opinion... against oil,” Barkindo said. In response, 16-year-old Swedish climate activists Greta Thunberg tweeted “Thank you! Our biggest compliment yet!”
Recently, Kuwait said that it might lower its oil production targets because of climate change. Instead of aiming to produce 4.75 mb/d by 2040, the country may only target 4 mb/d, sources told Bloomberg.
Even the partial IPO of Saudi Aramco could be viewed in the context of questions about peak demand. With consumption growth in doubt, and climate pressure escalating, Riyadh is hoping to cash in some chips today.
By Nick Cunningham, Oilprice.com
More Top Reads From Oilprice.com:
Hootsuite founder and chief executive Ryan Holmes announced Tuesday that he plans to step aside, and the company will begin a search for a new CEO.
In an exclusive interview with the Financial Post, Holmes said he plans to continue to serve as executive chairman of the Vancouver-based social media management company he started in 2008.
Hootsuite makes tools for enterprise social media managers to monitor and post content across Facebook, Twitter, LinkedIn and other platforms. Hootsuite operates on a freemium model, and the company says it has more than 200,000 paying customers.
Speaking to the Financial Post, Holmes said he wanted to make it clear that the business is on a solid footing as he prepares to take a step back.
About a year ago, the company declined to comment on media reports that it had retained Goldman Sachs to explore a possible sale. Then in April of this year, Hootsuite reportedly laid off approximately 10 per cent of its workforce, which fuelled speculation that the company was gearing up for a sale or an initial public offering.
Holmes confirmed that the company explored the possibility of a sale in 2018, but said nothing came of it.
“The board is beholden to its shareholders and there was some inbound interest,” he said “We felt it prudent and our responsibility as a board to investigate that inbound interest and so we started the process with Goldman Sachs to have a broader market check.”
As for the financial health of the company, Holmes said the restructuring allowed Hootsuite to achieve profitability and refocus the business, but he downplayed the possibility of an IPO in the near future.
“We look at a lot of companies that are IPOing and in the last little while, and I’m sure you’re following some of these names that are burning cash at a very high rate, and we decided that we wanted to be a company that was growing but also profitable,” Holmes said. “Because of that we can decide if and when we want to go public. And if we do so, it’ll be because we want to, not because we’re forced to in order to make our next payment.”
Holmes said he is stepping back now because he wants to spend more time with his family, something that has become a bigger priority since the birth of his daughter.
“It’s not a snap decision,” he said. “I’m down to Mexico right now with my family and spending a bit of time with them. And, you know, I want to really enjoy this chapter.”
Hootsuite has historically flirted with the “unicorn” moniker given to tech startups that achieve a valuation of $1 billion. A 2014 funding round reportedly put the valuation of the company at $1 billion, but follow-up news stories cast doubts on whether it was actually worth that much.
When rumours of a sale surfaced last year, Bloomberg reported the price was “at least $750 million.”
In a letter to shareholders announcing his departure plans, Holmes laid out some numbers from a “benchmarking exercise” earlier this year, looking at other companies that went public.
Holmes said three numbers stuck out to him — average age of 14 years old, average annual recurring revenue of $200 million, and an average valuation of $3.6 billion.
In the same note, Holmes disclosed that Hootsuite is on track for $200 million in annual recurring revenue this year, and that the company is 11 years old.
“As Hootsuite will hit the ARR revenue benchmark this year, it tells me we’ve built something at a breakneck speed, that is highly valuable,” Holmes said in his note to shareholders. “Through this year we’ve been especially focused on remaining cash-flow positive vs. a growth at all-cost strategy; given the public markets’ recent reaction to grow at all cost companies, we’re even more bullish on this approach.”
Speaking to the Financial Post, he said an IPO or a sale is still a possibility, but the primary mandate for the new chief executive will be to expand the company’s product offerings, explore possible acquisitions and further strengthen the business.
“And if we do well at that, you know, we will ultimately be rewarded, whether it is an IPO or through inbound interest through M&A, but that’s not going to be the prime focus of the successor,” Holmes said.
He also reflected on the evolution of social media in the 11 years since the company started. Holmes said that he sees the current public scrutiny of platforms like Facebook and Twitter as an inevitable consequence of those services gaining widespread adoption. He likened the current moment to when government started taking television, radio and telephone technology seriously, and moved to regulate those systems.
In the end, he said he believes these will be good growing pains for social media.
“It would be a terrible thing if they were continuing to run really loose and data kept leaking,” he said.
“Ultimately, this is really important stuff that needs to be investigated. This is the best thing for the consumer at the end of the day that this is tightened up and, ultimately, because of that, I think it’s the best thing for the social networks.”
• Email: jmcleod@nationalpost.com | Twitter: jamespmcleod
Alexandra Olson and Dee-Ann Durbin, The Associated Press
Published Tuesday, November 5, 2019 1:05AM EST
Last Updated Tuesday, November 5, 2019 7:19AM EST
NEW YORK -- Workplace couples are often romanticized -- think Bill and Melinda Gates or Michelle and Barack Obama. But when the relationship involves two people with unequal power, it can also be fraught with peril, especially in the 'MeToo' era.
McDonald's CEO Steve Easterbrook is only the latest chief executive to be ousted over a consensual relationship with an employee. Increasingly, U.S. companies are adopting policies addressing workplace romances, a trend that began well before the 'MeToo' movement galvanized a national conversation surrounding sexual misconduct.
Addressing workplace romance can be complicated, but many companies remove any gray areas by forbidding managers, especially C-suite executives, from having relationships with subordinates given the potential for favouritism or lawsuits if the relationship sours.
There are questions about whether consent is truly possible when the power imbalance is especially great. Many women who have come forward to share their 'MeToo' stories have said that they feared the consequences of saying no to a powerful person who could influence their careers.
"That power difference can create a dynamic where the relationship can never truly be consensual," said Debra Katz, a founder partner of the law firm Katz Marshall & Banks who has represented women in several prominent sexual harassment cases. "The 'MeToo' movement has shown how quickly it can go from consensual in the beginning to a huge problem when the relationship goes awry."
Easterbrook's departure comes as McDonald's steps up its efforts to stop sexual harassment after dozens of employee complaints.
Over the last three years, more than 50 McDonald's employees have filed cases alleging sexual harassment with the U.S. Equal Employment Opportunity Commission or in state courts, according to Fight for $15, a labour advocacy group.
In August, the hamburger chain unveiled a program to teach its 850,000 U.S. employees how to recognize and report harassment and bullying. Franchisees -- who own 95 per cent of McDonald's 14,000 U.S. restaurants -- aren't required to offer the training, but the company expects them to provide it.
McDonald's said Easterbrook violated company policy forbidding managers from having romantic relationships with direct or indirect subordinates. In an email to employees, Easterbrook said the relationship was a mistake and he agreed "it is time for me to move on." He was replaced by Chris Kempczinski, who recently served as president of McDonald's USA.
Time's Up, a group that fights harassment and has been supporting workers' legal cases, said Easterbrook's departure should provide an opportunity for McDonald's to do more, including making sexual harassment training mandatory.
"Under the new leadership of Chris Kempczinski, McDonald's has an opportunity, and obligation, to act to ensure that all of its locations are safe and equitable for all," said Jennifer Klein, chief strategy and policy officer at Time's Up.
Easterbrook followed in the footsteps of Intel Chief Executive Brian Krzanich, who resigned last year after the chipmaker found he engaged in a relationship that violated a "non-fraternization" policy that applies to all managers.
Other CEOs who have been pushed out over consensual relationships, include Darren Huston of online travel company Priceline, Brian Dunn of Best Buy and Harry Stonecipher of aerospace company Boeing.
In 2005 -- the year Stonecipher was pushed out -- just a quarter of U.S. workplaces had policies addressing consensual relationships, according to the Society for Human Resources Management, the world's largest group of human resources professionals.
By 2013, the number had jumped to 42 per cent, according to a SHRM survey that year of 384 of its members. Of those workplaces, 99 per cent prohibited romance between a supervisor and a direct report.
SHRM has not conducted a more recent survey on the issue, but other research suggests such policies are even more common now. In a 2018 survey of 150 human resources executives, the executive coaching firm Challenger, Gray & Christmas found that 78 per cent of companies had policies discouraging dating between subordinates and managers.
Much more complicated is how far to go with such policies. Not all policies pertain just to bosses and their underlings.
The SHRM study found that 45% employers with workplace romance policies forbid relationships between employees of significant rank differences, while 35 per cent prohibited them between employees who report to the same supervisor.
Many human resources professionals, however, believe it's unrealistic to adopt a blanket ban on workplace romance.
A SHRM survey from January 2019 found that one-third of American adults have been in a romantic relationship with someone at work.
"People meet at work. It's not an uncommon place for romantic relationships to start," said John Gannon, an employment law attorney with Skoler Abbott in Springfield, Massachusetts.
A growing trend among small companies is to sponsor happy hours for their staffers to increase camaraderie, said David Lewis, CEO of HR provider OperationsInc, based in Norwalk, Connecticut. Those events can be fertile ground for romantic relationships, so it's hard for a business owner to then tell staffers to break up or quit, he said.
Some companies have what are known as "love contract," which require disclosing relationships to the company and agreeing to act appropriately.
Lewis said he has seen a big increase in business owners asking for on-site training sessions for employees to raise their awareness on what constitutes harassment. Those sessions discuss relationships between staffers and warn that both partners in a relationship must act professionally with no public displays of affection. And they're expected to remain professional if they break up.
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AP Business writer Joyce Rosenberg contributed to this story.
