Add Brain Drain to Softbank's Latest Struggles And Billion Dollar Losses: Report

SoftBank Group Corp SFTBY growing loss of key executives is putting more pressure on founder Masayoshi Son coinciding with the bleak outlook for the Japanese conglomerate, Bloomberg reports.

SoftBank lost two more managing partners at its Vision Fund, Yanni Pipilis and Munish Varma. The number of departures reached ten since March 2020.

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Vision Fund veteran leader Rajeev Misra relinquished his responsibilities to start his investment fund. COO Marcelo Claure quit earlier this year. Chief Strategy Officer Katsunori Sago, who had been on SoftBank’s board with Misra and Claure, resigned in 2021. 

Son shifted focus away from the Vision Fund after steep losses and toward opportunities, like the U.K. chip firm Arm Ltd. Son aimed to reposition the chip designer and cut costs to boost profits as he braced to take it public next year.

Son had declined to provide the conventional profit sharing to partners, making it challenging to retain them. Additionally, the losses aggravated the situation leaving little overall profit to attract top performers.

The Vision Fund unit hinged to a loss of ¥2.64 trillion for the year ended March 31, down from a record ¥4.03 trillion profit in the previous year. SoftBank’s overall annual net loss was ¥1.7 trillion versus a ¥5 trillion profit a year ago.

The internal rate of return for the first Vision Fund’s limited partners was 11% through March 2022, versus an average of about 38% for the industry. The second Vision Fund’s IRR is 0%, against an average of 45%.

SoftBank suffered missteps at portfolio companies like WeWork Inc WE and a broad meltdown in technology stocks that hit holdings like Alibaba Group Holding Limited BABA.

SoftBank’s board members had warned against its efforts to compete for talent. Instead of boosting official remuneration, SoftBank has offered up side deals for executives to enrich themselves.

Experts say the departures are making it more challenging for SoftBank to recover, especially in the current tough market.

Photo via Wikimedia Commons

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