They are a late stage investor, so their bets are expected to be expensive. They are also not looking for quick returns, but rather counting on their portfolio companies to substantially change the industry that they operate in over the long term. i.e. Uber for driverless cars, semis, logistics, shipping. WeWork for pulling off spaces-as-a-service globally (for offices, apartments, schools, lifestyle services). Slack being able to shift enterprise communication and collaboration away from email and Microsoft products.

And while their top 2-3 investments get all the PR as expected, they are in a ton of different sectors and countries - https://visionfund.com/portfolio.

"A corporate group growing for the next 300 years"

I think that says it all

$100B is way too big of a fund to be able to reasonably deploy. But Saudi Arabia needs to invest in something; they're $45B of that $100B.

But WeWork seems like an overly stupid investment to make, no? Uber was a calculated risk. But WeWork?? They better hope they can sell some stock at IPO and WeWork’s stock doesn’t totally tank during the holding period. WeWork could pretty easily result in billions in losses.

My guess is that SoftBank believes it has covered the worst case scenario for its WeWork investment through its preferred stock liquidation preference and WeWorks real estate assets (although I believe they mostly have leases). It still seems like a big gamble, but I suppose they think they either can get the company to IPO, or they will end up owning most of the company.

Uber was a bet on a pie in the sky technology (self driven cars) and a bad one at that because Uber wasn’t even the best places to take advantage of self driving cars. Google was probably in the best position (google maps trumps the Uber app any day) followed by the car companies.

Wework on the other hand has a bunch of fairly cheap leases and even better for them, they have become such big tenants for many landlords they can dictate pricing downwards if necessary.

Besides, their brand is much stronger than what Uber’s was when SoftBank invested.

So I’m not convinced wework is a worse investment than Uber which has absolutely no moats.

Edit: Also, the strongest bull case for WeWork is basically that real estate is one of the largest industries in the planet (behind maybe energy). And how many global real estate brands exist? Almost none.

WeWork just seems like outright fraud to me with a self-dealing CEO and with a lot of liabilities in the form of long term leases that they will never make a profit from.

Well if there's no inflation.

Now, if we got some inflation, those leases would start to look pretty cheap. Then the debt turns into equity, viola!

See lowering interest rates to 0 is fun.

This comment was downvoted for snark, but the point is accurate. Inflation could double rental prices and then all of Wework leases will be worth a lot.

Aren't leases usually inflation adjusted?

In most places it's usually completely dependent on the contract, if you are a big leaser (such as WeWork) you can leverage a lot of terms just by having money and paying upfront.

I have never seen an inflation adjusted lease in any of the commercial leases I've done.

Why is WeWork a stupid investment?

Probably because their margins are roughly -100%.

Even if their investments aren't profitable, it's still better for humanity as this money is being invested in innovative ideas.

While Saudis might have invested into building yet another Mosque or Tomb.

In India Taj Mahal reported costed Mugols lack chunk of GDP.

Saudi Arabia doesn’t spend money on tombs.

> Per Islamic tradition, his funeral was held the same day, a public ceremony at the Grand Mosque of Riyadh before burial in an unmarked grave at the Al Oud cemetery. [0]

[0] https://en.wikipedia.org/w/index.php?title=Abdullah_of_Saudi...

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> Jan. 23, 2015, 2:49 AM PST / Updated Jan. 23, 2015, 10:22 AM PST

> RIYADH, Saudi Arabia — There were no golden carriages.

> Friday's funeral of Saudi Arabia's King Abdullah was a relatively simple affair in line with the austere form of Islam practiced by one of the world's wealthiest ruling families.

> The body of the former custodian of Islam's two holiest cities, Mecca and Medina, was bathed according to Islamic ritual. The late ruler, whose net worth has been estimated at around $20 billion, was then wrapped in two pieces of plain white cloth — the standard shroud for all Muslims.

> According to tradition, nothing out of the ordinary was to be done to King Abdullah's body. It was taken to the Imam Turki Bin Abdullah Grand Mosque in the capital Riyadh for the funeral prayers at around 3:15 p.m. (7:15 a.m. ET). In line with codes that dictate that a tribal chieftain be accessible to everyone in his community, the ceremony was open to the public. Women were able to attend, sitting in the women's section of the mosque.

> After the funeral, Abdullah's shrouded body was carried on a board and driven across an empty desert to Al Oud cemetery, which is home to raised graves. A black truck bearing Abdullah's body came to a stop, and Saudi royals gathered at his gravesite. His successor, the new King Salman, was dressed in a simple black gown.

> A group of men lowered the pallet containing Abdullah's body to the ground, and gently tipped it toward the unmarked grave. The body was set inside the burial plot, and mourners threw handfuls of yellow-colored soil onto it. That dirt was then covered with a bed of small stones as the mourners look down. They slowly turned away, led by King Salman.

> While public displays of grief are frowned on under the strict form of Wahhabi Islam practiced in the kingdom, tens of thousands are expected to pay their condolences during the three-day period of mourning. Most of the visiting will be held at the king's palace and all the senior royals will be there to receive Salman's subjects and visiting heads of state and dignitaries, including Vice President Joe Biden.

> Visitors will be greeted by a line of royals arranged according to age instead of rank. [1]

[1] https://www.nbcnews.com/storyline/saudi-arabia-succession/sa...

WeWork the tech company and WeWork the REIT are two forms of the same company. The tech company is high risk. The real estate portion is backed by assets.

WeWork owns very little property. For the most part they rent all the space that they then sublease to other tenants.

The CEO apparently personally owns some properties and self deals them back to WeWork on lease terms. https://www.businessinsider.com/wework-ceo-adam-neumann-offi...

Maybe in the venture capitol market, but Norway's got 1 trillion dollars invested mostly in the public market and they are doing fine [0].

[0]: https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...

I worked for a company that took SoftBank money, though I joined after the investment.

As someone else mentioned they are later stage investors, and do look for potentially transformative things. In order to get in they offer large investments and ridiculous valuations, which appeal to entrepeneur’s egos. The dark side of accepting money at high valuations is The Next Round.

If you aren’t profitable by the next time you need money, you better have shown enough growth to not only match the SoftBank investment but to go beyond it to a reasonable investor. Otherwise you don’t have a growth story and investors turn their noses up (or offer shitty down-round terms).

So in a way SoftBank can (and has) torpedo its own investments by its entry strategy and human greed. In the case of my company they eventually sold, but only after a complete pivot and focus on a different market, and ultimately at a lower price.

per discussions with people in this space, they act like they have money burning a hole in their pocket. Compare to Buffet who will just accumulate cash if he doesn't feel he has a good place to put it.

The Vision Fund is $100 billion dollars, which is ludicrous by VC standards. Investing that sort of money sensibly, particularly if you limit yourself to IT startups (which historically don't need that much capital compared to, say, oil exploration or an iron ore mine), is not easy.

Forget how the saying goes, but it's something along the lines of:

If you are worth $100M then your goal is to grow that to $1B. If you are worth $1B then your goal is now to lose it.

At some point capital has diminishing returns.

I think I read recently that buffet is sitting on an equivalent amount of cash, waiting for the right investment

Every big player is sitting on approximately that much cash: MSFT, APPL, GOOG. There is probably literally trillion dollars lying around in mostly liquid assets trying to find better long term opportunity. I think the productivity in last decade had been amazing but no one knows where to invest all these extra earnings they have had.

Buffett did lose billions on Kraft Heinz which we’re huge purchases costing tens of billions.

At least as recently as May 2017 that was true: https://www.cnbc.com/2017/05/05/warren-buffett-reveals-whats...

Buffet is at 122B now: https://www.google.com/amp/s/markets.businessinsider.com/amp...

But he invests differently - often buying entire, functioning companies.

Warren holding cash is a statement on equity values IMHO. This is not financial advice.

I think the biggest thing you are missing is that Softbank gets a guaranteed return on IPO. If their shares are < agreed_return Uber issues them shares to make up the difference.

But after the IPO they are on their own. So if the price drops or they hold a huge position it can be a problem.

The strategy of SoftBank and all long term investments is for the companies and products they invest in to blossom into big money producing engines; they don’t care about short term time horizons, so much as picking 10-20% of their investments that will 10-10000x their initial investments over the next 20-50 years.

But there's no way they're going to see those return on late stage investments? For Uber to 10x from their current market cap, they'd have to be worth ~$700 bn. That seems hard to achieve, let alone multiples in higher orders of magnitude.

You have the stages and return profiles completely mixed up here. What your day is true for early stage. Not the case for late stage

Was Apple late stage enough in 2000?

Your example is an extreme outlier.

Yea the unicorns are always outliers. If one of the company actually ends up being Apple, they'll win.

I think the people running it are focusing on management fees over returns. As long as they don’t lose money they can skim quite a bit.

But don't they need to show returns to their investors?

I imagine they just need to not lose too much. The whole thing is set up to buy everything for sale in case oil crashes.

There's a reported annual returns benchmark they need to hit.

From their blurb:

>The SoftBank Group has grown by anticipating paradigm shifts in technology and building businesses to take advantage of the next era.

They kind of look where the market is shifting eg ride sharing, co-working and try to invest in the leader eg. Uber or WeWork. I guess the theory is as the world shifts that way they will make profits. Time will tell with Uber and We. They did well with AliBaba and Yahoo in the past.

Banks have tons of offices which they want to lease out (property). Therefore investment could be as simple as lending properties.

That's the only way one can deploy hundreds of billions.

Its called momentum investing.