SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil • Hacker News Board

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#61

Post by rchaud » Wed, Nov 06, 2019, 3:16 PM UTC

ckastner wrote: post #25

It's refreshing to see that the financial Shenanigans SoftBank was playing with WeWork and even Uber backfired like that in the end. Manipulating pre-IPO valuations as aggressively as they did was just insane.

Markets were already wary since the Uber IPO was a flop. WeWork was in the same class of "We're going to become a monopoly, so invest now!!" type investments.

Like Uber, they failed to explain away the gargantuan losses. By trying to massage the financials in full view of the public, that close to the IPO was probably what killed the IPO altogether.

I fear

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#62

Post by wpietri » Wed, Nov 06, 2019, 3:24 PM UTC

jayalpha wrote: post #50

cs702 wrote: post #39

$6.5B is the recognized loss, i.e., the lowest possible amount they can get away writing off on their accounting books. The real economic loss may be much higher.

What is a "real economic loss"? A real economic loss is a realized loss. As long as Uber and WeWork are not closed down, their future performance is hard to predict. Uber especially is not a bad company. I love them. And if you have used Uber you ask yourself, how could you have tolerated the taxi clusterfuck so long.

Sure, they're hard to predict, which is what makes Softbank's behavior here amazing. They're saying that by their own (surely optimistic) predictions, even they can't justify not declaring a loss.

As to a financial analysis of Uber, you're confusing some things. Uber did invent the summon-a-limo-with-your phone thing, so they get credit there. They didn't invent the rideshare model, but they did raise the most money to crush their competition and they were the most aggressive about committing crimes, so they currently have the biggest market share.

But all of that's ancient history. The real question for financial valuation is whether they can sustain that business once they stop burning investor money to get ahead. And I think there's good reason to believe that it will never be a particularly profitable business. Since Uber's valuation is built on being able to one day extract oligopoly rents from a large sector, it's perfectly possible that 10 years from now they'll be the next Groupon: once the new hotness, but with the stock now trading at 10% of its peak.

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#63

Post by rasz » Wed, Nov 06, 2019, 3:30 PM UTC

cs702 wrote: post #39

$6.5B is the recognized loss, i.e., the lowest possible amount they can get away writing off on their accounting books. The real economic loss may be much higher.

I bet its going to be more that SoftBanks initial investment pre "rescue".

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#64

Post by LandR » Wed, Nov 06, 2019, 3:35 PM UTC

treis wrote: post #59

Traster wrote: post #9

It seems pretty clear that Softbank were badly misvaluing We and Uber. The second they hit the public markets suddenly Softbank could no longer sustain their paper valuations which is causing this loss. It's kind of funny that Softbank can mark its own homework on this - they buy the company and then because the investment isn't liquid they can basically choose any valuation they want for the companies they own. It'l…

>Softbank were badly misvaluing We and Uber. I don't think these two really belong together. We is probably worth nothing, and even that might be generous. Uber is worth billions with the only real debate being how many billions.

>Uber is worth billions with the only real debate being how many billions.

Assuming Uber ever turns profitable.

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#65

Post by KoftaBob » Wed, Nov 06, 2019, 3:36 PM UTC

It's like these investors never learn that the "our unit economics are horrible, but it'll be worth it when/if we become a monopoly!" philosophy rarely plays out well.

The same industry that harps on about how disruptable old school monopolies are, is somehow buying into that? I don't get it.

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#66

Post by wolco » Wed, Nov 06, 2019, 3:42 PM UTC

treis wrote: post #59

Traster wrote: post #9

It seems pretty clear that Softbank were badly misvaluing We and Uber. The second they hit the public markets suddenly Softbank could no longer sustain their paper valuations which is causing this loss. It's kind of funny that Softbank can mark its own homework on this - they buy the company and then because the investment isn't liquid they can basically choose any valuation they want for the companies they own. It'l…

>Softbank were badly misvaluing We and Uber. I don't think these two really belong together. We is probably worth nothing, and even that might be generous. Uber is worth billions with the only real debate being how many billions.

They expanded quickly but haven't reached profitability. Raising prices/shuting down growth still wouldn't be enough to reach that point.

If Lyft died and could raise prices perhaps as it stands now they are not worth billions because of debt/losses.

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#67

Post by onlyrealcuzzo » Wed, Nov 06, 2019, 3:46 PM UTC

jussij wrote: post #24

atupis wrote: post #6

is this a sign of bubble popping? although I am not sure can this spread outside of Saudis and Softbank.

The last decade has seen global monetary policy create a situation where cash is very cheap (i.e. many central banks are now offering close to zero interest rates and some have actually seen negative interest rates). That cheap cash then finds it's way into assets like stocks and housing with that cheap money putting upward pressure on those assets. In that same climate we have seen a decade long stagnation in wages,…

Well, once you go to low interest rates, you're effectively stuck with them.

See Japan. Low interest rates make it easy to take on more national debt, so you do. If Japan's bond yields would rise even to 2% (a still ridiculously low yield) then 100% of their tax revenue would go to debt service. They'd have nothing left to spend on actually running the government.

"Stubborn" Germany refusing to take on ludicrous levels of debt they don't need to "grow Europe out of their troubles" is the only thing keeping Europe out of this situation.

Our trillion+ yearly deficits can't go on much longer until we end up in a similar situation.

It's not like the central banks can just realize their mistakes and get out of low interest rates.

As a side note -- I'm very interested in how Japanese banks have survived this. US banks usually make more money the higher the interest rate is. European banks have REALLY struggled in the low interest environment, and US banks were looking pretty bad even when interest rates were only at 1%. Does anyone know how the Japanese banks are surviving?

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#68

Post by thrav » Wed, Nov 06, 2019, 3:48 PM UTC

KoftaBob wrote: post #65

It's like these investors never learn that the "our unit economics are horrible, but it'll be worth it when/if we become a monopoly!" philosophy rarely plays out well. The same industry that harps on about how disruptable old school monopolies are, is somehow buying into that? I don't get it.

I mean, the strategy has created all of the biggest winners: Amazon, Google, Facebook, Spotify, eBay, PayPal, (maybe) Airbnb, etc.

Each of them effectively monopolized something for close to a decade.

It’s not a failed proposition; it just might be harder to pull off in some spheres than others, and harder as more money gets funneled into startups, and harder as the giants jump into your newly minted market, or acquire that new market.

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#69

Post by dentemple » Wed, Nov 06, 2019, 3:48 PM UTC

treis wrote: post #59

Traster wrote: post #9

It seems pretty clear that Softbank were badly misvaluing We and Uber. The second they hit the public markets suddenly Softbank could no longer sustain their paper valuations which is causing this loss. It's kind of funny that Softbank can mark its own homework on this - they buy the company and then because the investment isn't liquid they can basically choose any valuation they want for the companies they own. It'l…

>Softbank were badly misvaluing We and Uber. I don't think these two really belong together. We is probably worth nothing, and even that might be generous. Uber is worth billions with the only real debate being how many billions.

WeWork has actual real-estate assets. So, they do have some worth.

Certainly not Softbank's valuation-levels of worth, but it's still not nothing.

Re: SoftBank Reveals $6.5B Loss from Uber, WeWork Turmoil

#70

Post by bpt3 » Wed, Nov 06, 2019, 3:49 PM UTC

jayalpha wrote: post #50

cs702 wrote: post #39

$6.5B is the recognized loss, i.e., the lowest possible amount they can get away writing off on their accounting books. The real economic loss may be much higher.

What is a "real economic loss"? A real economic loss is a realized loss. As long as Uber and WeWork are not closed down, their future performance is hard to predict. Uber especially is not a bad company. I love them. And if you have used Uber you ask yourself, how could you have tolerated the taxi clusterfuck so long.

Of course you love Uber as a user, each ride you take is subsidized by their investors and it's generally a better experience than finding a taxi.

Why an investor would love this arrangement is not clear to me.