SoftBank ($TYO:9984) has seen it all. Perhaps solely responsible for the trend of inflating loss leaders to become decacorns, SoftBank has had an undeniable influence on the behaviors of VCs and investors across the globe. With a hand in the pocket of some of the largest tech startups in the world, SoftBank has been through the highs and lows that come with a volatile, rapidly changing sector.
2019 was a rocky year for SoftBank, as it faced meltdowns of some of its biggest investments while others soared. But the landscape of summer 2020 is very different from fall of 2019, and some of the investments that looked like golden eggs in SoftBank’s basket last year are now rotten. But even while some plummet, COVID-19 has helped bring certain startups into the spotlight, and defensive moves across SoftBank’s portfolio led them to post $12 billion in profit last quarter.
So in 2020, which of SoftBank’s subsidiaries are thriving and which are dying? Here are the best - and worst - companies in SoftBank’s portfolio.
Best Performers
1. Bytedance
Valuation: $100 billion
Bytedance’s biggest app, TikTok, has been a success since it launched, but stands out as one of the most notable success stories of the pandemic. The short video app has thrived now that people across the globe have extra time on their hands trapped indoors.
App store ratings for TikTok are up 201% year-over-year, and TikTok has become a cultural staple on the level of Vine, the old app that inspired it and its predecessor Musical.ly. All that attention, however, has cast a shadow over TikTok’s global operations.
In June, the Indian Government banned TikTok along with a host of other Chinese-owned apps for data mining practices. Last month, the United States followed suit, issuing an executive order to ban the app come mid-September. However, Bytedance has managed to outmaneuver this move and is now on track to sell TikTok - worth approximately $50 billion - to an American company.
2. Slack
Valuation: $18.51 billion market cap
Even before COVID-19, workplace messaging app Slack had become a staple of American offices. Now, it’s practically a necessity. Work from home means companies like Zoom and Slack, which offer easy ways to communicate over distance, have become essential tools for companies of all sizes.
Slack is likely to continue growing fast as companies make permanent shifts towards remote work. Twitter has announced it will allow employees to work from home indefinitely while companies like Uber are extending work from home policies until summer 2021. With companies of that size moving their large workforces across the country, Slack will remain an indispensable tool.
3. Lemonade
Valuation: $3.3 billion market cap
Insurance app Lemonade grew remarkably during the pandemic to become one of the first IPO success stories of 2020, and almost single handedly revitalized interest in IPOs during a year in which many predicted IPOs could stall out completely.
App store ratings for Lemonade are up 36% from January, and will likely continue to rise as the country faces an eviction crisis. Lemonade has not yet posted a profit, ranking it alongside other SoftBank investments which bleed cash even when they launch an IPO, but its success in the market so far has certainly helped SoftBank recoup some of 2019’s major losses
Worst Performers
1. OYO
Valuation: $8 billion
Hotel company OYO is a perfect example of the kind of company that has caused so much trouble for SoftBank in recent years. Not profitable, OYO nonetheless grew to epic proportions in 2019, becoming the largest hotel chain in the world, establishing a dominant presence in India and China and beginning to lay claim to US markets.
Then COVID-19 happened. Travel has died out during the pandemic, and hotel companies across the world are shutting down locations and cutting costs. Even in an industry ravaged by the pandemic, OYO’s decline stands out as especially gruesome. In July, OYO shut down over 50% of its locations overnight, and the decline continued into the summer months. Multiple rounds of layoffs and closures with no end in sight as well as a $2 billion drop in valuation make a strong case for OYO as the current worst performer in all of SoftBank’s portfolio.
2. Uber
Valuation: $59 billion market cap
Few companies have seen as much controversy over the years as Uber, which has battled PR meltdowns caused by absurd CEOs, labor disputes, and everything in between. The ridesharing service took a notable hit after COVID-19 began, with its only standout service being UberEats. Food delivery apps heated up during the pandemic, and after a failed attempt buying GrubHub earlier in the year, Uber ended up buying Postmates in an attempt to bolster the one service it had that was doing good business.
However, the controversy hasn’t stopped for Uber. The company has long tried to avoid claiming its drivers as employees, but is starting to see the end of the rope. Last month, California judges ruled that Uber and Lyft could no longer avoid calling drivers employees, which means that Uber will suddenly be faced with mountainous expenses unless it shuts down operations in the state as Lyft did. Forever under the microscope, Uber will likely battle similar rulings in other states in the months and years to come.
3. WeWork
Valuation: $5 billion
WeWork’s absolutely epic crash in 2019 nearly single handedly soured the entire investment community on SoftBank’s portfolio, and remains a worst-case scenario for how these businesses can end up. Before fall of 2019, WeWork looked like one of the most promising companies in SoftBank’s portfolio, growing worldwide to become one of the largest tenants in cities like London and New York. There was just one problem: their model was bogus.
Once valued at nearly $47 billion, WeWork is now estimated to be worth a mere $5 billion. Though widely panned CEO Adam Neumann was kicked out of the company last year, the bleeding at WeWork extends beyond a bad executive and extends down to the company’s very core. Its model simply isn’t sustainable, and though WeWork fashioned itself as a tech company, it has very little to offer in terms of proprietary tech. When you boil it down, all WeWork is is a subletter with exorbitant costs and a pretty brand.
