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SoftBank Vision Fund: Blinded by valuation euphoria

SoftBank’s nearly $100 billion Vision Fund gave companies like dog-walking app Wag and indoor farm Plenty more cash than they wanted, but the investments failed to ignite growth.

SoftBank Group Corp.’s longtime strategy of dumping mountains of cash on promising young companies to create big winners failed dramatically at WeWork, and is showing cracks at a number of its other investments.

SoftBank’s nearly $100 billion Vision Fund gave companies like dog-walking app Wag and indoor farm Plenty more cash than they wanted, but the investments failed to ignite growth. After a sizable bet on online car-lessor Fair, that company is struggling to stay afloat. Wag is for sale, people with knowledge of the companies say.

Dozens of other firms, such as Chinese ride-hailing giant Didi Chuxing and South Korean e-commerce company Coupang, are in industries known for burning cash and with uncertain paths to profitability. The Wall Street Journal reported that Didi—the Vision Fund’s biggest investment at $11.8 billion—was seeking more cash this summer, months after a company executive said it was losing money on every fare booked. Coupang, in which the Vision Fund has invested $2.7 billion, said that last year its operating loss grew faster than its revenue.

Some of SoftBank’s gains have come by adding to its bets on companies at higher valuations. In one of the starkest examples, SoftBank and the Vision Fund have led more than $2 billion in funding rounds for fast-growing Indian hotel chain Oyo Hotels & Homes since 2015—pushing the valuation up to $10 billion from less than $1 billion just two years ago and booking paper gains for the fund along the way.

The Vision Fund, too, has made some successful bets. It sold Indian e-commerce firm Flipkart to Walmart for a $1.5 billion profit. And at the end of June, it said the companies that had gone public in its portfolio—including Uber Technologies Inc. and cancer-test company Guardant Health —had increased in value 2.6 times from the previous year, although some of those shares have since tumbled.

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WSJ
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