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They turned, as the Son admits to the error of the Vision of the Fund’s $8.9 billion loss

TOKYO (Reuters) – SoftBank slumped to its first quarterly loss in 14 years on Wednesday, dragged down by an $8.9 billion hit on its giant’s Vision for the Fund, as a CEO, Masayoshi Son has admitted to poor investment judgment, and is turning a blind eye to the problems at startup, WeWork.

The size of the loss indicates that the risk to his Son’s strategy of splashing out on a huge cash-burning start-ups. It has also cast a pall over his attempts to raise a second, a massive investment fund.

WeWork, the spectacular flame-out this year, and has led to questions concerning the Son, in the judgment of the backing bohemian-tech founders, such as WeWork Adam Neumann. They turned, was forced last month to pay more than $10 billion bail-out of the office-sharing start-up after the IPO, the attempt flopped.

“My investment in the opinion was, in many ways, and for that I am deeply, to reflect, that,” Man, 62, told a press conference on the occasion of the results. It was a remarkable admission for an executive known for his ebullience.

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He told me that he was keeping an eye on the problems with Construction in the areas of corporate governance. Nonetheless, in the Son’s resurrection, that WeWork is still a sound business, saying that it was a “hockey stick” recovery of profits in the end.

SoftBank Group Corp., said the $100 billion Vision for the Fund for a net operating loss of 970 billion yen ($8.9 billion) in the July-September quarter, and an unrealized loss of 537.9 billion yen for the first six months of the year, when the value of the technology bets, such as WeWork and Uber Technologies have tumbled.

On the whole, the group reported an operating loss of 704 billion yen ($6.5 billion) in the July-September quarter, compared with a 706 billion yen of the profit in the same period of the previous year and a 48-billion-yen loss predicted by analysts, according to the Refinitiv.

SoftBank said the combined loss to the direct holdings of the shares in the WeWork and WeWork, shares held by the Vision of the Fund was $8.2 billion.

FILE PHOTO: a japanese SoftBank Group, Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, on November 5, 2018. REUTERS/Kim Kyung-Hoon/Files PhotoDEBT FOCUS

The results are likely to be a renewed focus on SoftBank’s substantial debt pile. It has more than $51 billion in outstanding bonds and an additional $36 billion in loans from the bank. The weighted average cost of debt of 3.7%, the seventh highest among all of the companies in the Nikkei 225 Stock Average, according to the Refinitiv of the data. Both Moody’s and S&P rate the debt as junk.

Saudi Arabia has supported the Vision Fund, which is run by a former Deutsche Bank banker, Rajeev Misra, had invested $70.7 billion, with 88 companies at the end of September. That investment is now worth $77.6 billion, exclusive of exit, it said.

With an increased control of on the path to profitability and many of its bets on unproven startups, the Son, was also a bit cautious on the timing of IPOs, a key step in order to release the capital to the holding, investment juggernaut growth.

The son also said that he expects that the Vision Fund will continue as planned, and is a similar size to its first fund, but he declined to provide an update on the negotiations with the investors.

FILE PHOTO: a japanese SoftBank Group, Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, on November 5, 2018. REUTERS/Kim Kyung-Hoon/File Photo

The value of the fund’s publicly traded investments, including Uber, Slack Technologies, and Guardant Health, fell down in the course of the quarter.

With Uber, which will slide the losses mount, and the post-IPO shares (lock-up period ends, the shares are hitting a new low this week.

SoftBank’s investing activities were supported by the other pillars of the Son’s kingdom, including a domestic telecom operator, SoftBank Corp, which on Tuesday reported a 9% rise in second-quarter operating profit, beating estimates, which was driven by the cash-cow of mobile business. [L3N27L1Q2]

They turned, not quite the forecast for the current year, saying there were too many uncertain factors.

Additional reporting by Tom Bergin in London; Editing by David Dolan, Muralikumar Anantharaman and Mark Potter

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