“So this time, the earnings results announcement is not good at all,” said SoftBank CEO Masayoshi Son at the start of the company’s quarterly earnings call on Wednesday. It’s hard to see how he could have said anything else, given the whole thing where SoftBank poured billions of dollars into WeWork because Son thought Adam Neumann was a genius, and then paid billions more to get Neumann to go away.
This was never going to be an easy presentation. Fortunately, he had slides.
For example, here is a slide explaining that when WeWork’s expenses exceed its revenues, it loses money:
And here is one explaining that SoftBank’s plan to fix that problem is to increase revenues and reduce expenses:
Here is a slide explaining that WeWork tends to lose money:
And here is a slide explaining how nice it would be if WeWork made money:
But my absolute favorite slide is this one, showing that while SoftBank has a market capitalization of $82 billion, they have good reason to think the company’s assets (such as its interests in WeWork, Sprint, Chinese internet giant Alibaba, and the Japanese wireless carrier also called SoftBank) are worth $206 billion, after subtracting its debts.
Here’s what Son, SoftBank’s legendary founder, had to say about this chart:
SoftBank market value peaked at about 2000, when the Internet bubble burst, but we exceeded actually this time in terms of shareholder value. So from financial results perspective, it was terrible in the last three months. But shareholder value, which is the most important [key performance indicator] for us, is the biggest in our corporate history.
The valuations presented here are not crazy. You can quibble with some assumptions, but for the most part, SoftBank’s assets are holdings in other publicly traded companies, so the value of what SoftBank owns is mostly not a matter of opinion. But Son does not explore an obvious follow-up question: If this chart you have shown us is right, then why does the stock market treat your company as being worth $120 billion less than the sum of its parts?
One obvious answer is that the stock market expects him to take the profits from successful investments like Alibaba and pour them into shitty investments like WeWork.
Classically, if a conglomerate’s market capitalization is less than the total value of its businesses, the right thing to do is break it up. What this chart says is, if you bought SoftBank, fired Son, and sold the company off for parts, you’d make a profit of $120 billion. Private investors in WeWork (including SoftBank) became convinced that Adam Neumann was a massive liability, but this chart shows the stock market literally telling us that Masayoshi Son’s leadership is an intangible asset worth over negative $100 billion to SoftBank.
So maybe Adam Neumann isn’t the only charismatic founder-CEO who needs to be paid to go away.