In today's newsletter we talk about Softbank's earnings presentation, Masayoshi Son and flying horsies. Enjoy!!!
Finance is hard. And analyzing “earnings presentation” from investment companies — Wow, that’s the hardest thing to do.
And sure, anybody can tell you the results upfront. In fact, the press has covered it already. Softbank’s Vision Fund — an investment fund that was supposed to propel dreams of the future, made losses to the tune of $17.7 billion last year. The big investments they made in companies like Uber and WeWork are no longer worth what they used to be. They’ve had to take a hit.
But there’s more to an earnings presentation than what meets the eye.
I mean, look at this slide from Softbank’s presentation yesterday. What’s it telling you?
Look at it carefully…
Come on… Try….
Don’t worry, it’s okay. Our experts have this covered. So sit back and relax while we offer you context.
Expert Interpretation: As you can see, there is a valley in this picture. The valley is steep and many horsies are falling into the valley. By the looks of it, they are falling headfirst. Meaning we can’t rule out brain trauma if the horsies hit the surface hard. But even if they don’t, I am assuming they’ll get hurt.
But there’s a deeper meaning here. You see, the horsies that have stumbled are actually startups from the vision fund stable. And the valley is the impact crater — created by the coronavirus.
Also, if you pay close attention you can see that there is one horsie that has grown wings. It even has a cute horn — which gives me the impression that the horsie has turned into a unicorn.
But what if the horsie falling into the valley is already a unicorn (a startup worth a billion dollars)?
So many questions.
So few answers.
But it doesn’t matter. We still have work to do with this presentation. After all if we can’t figure out which horsies from the “Softbank stable” are likely to become flying unicorns, this goldmine presentation will have gone to waste.
So let's begin separating the plain horsies from the unicorns.
Vision Fund backed horsie 1: Uber
So, people are scared to travel. They are scared about sharing cab space. Total trips across ride-sharing apps fell by as much as 80% in April. Uber has already ceased operations in multiple areas. They’ve cut their workforce by as much as 23%. The financials look bad and the share price keeps tanking. So it’s definitely a horsie that’s falling into the coronavirus valley. But is it a horsie that’s going to come out of this crisis with flying colours?
We don’t know. What we do know is that the horsie is trying very hard. In fact, it’s been on a shopping spree of late — Trying to buy out existing competitors. Case in point — Uber’s bid to buy Grubhub.
For the uninitiated, Grubhub is an online food delivery service in the US — like Zomato and Swiggy. Now, bear in mind, Uber also does food delivery through Uber Eats. But the market is crowded now. If they acquire Grubhub they can suddenly get a ton of restaurants on the platform, and make up a lot of ground in a relatively short period. Meaning, this horsie is doing everything in its power to grow wings (and a horn) to emerge from the valley as a different beast altogether.
Good horsie all in all!!!
Vision Fund backed horsie 2: WeWork
This horsie is broken. That’s it. End of analysis.
Vision Fund backed horsie 3: Slack
A horsie that has much potential but is being kicked around by another bigger horsie — Microsoft Teams.
For the uninitiated, Slack is an online collaboration tool that aims to improve team productivity. You can add your office pals, chat with them, do video calls, write funny messages, send screenshots and do some work on the sideline if you’re into that sort of thing. And since millions of people are now working from home, Slack is quickly gaining traction. In fact, over an eight-week period in February and March, the company added over 9,000 new paying customers — an 80% increase from the 5,000 customers it added in its most recent quarter. Good horsie.
Unfortunately, Microsoft has been pushing its own online collaboration tool and they even reported they already had 44 million daily active users (DAU) as opposed to Slack’s measly 12.5 million DAUs.
But then, Slack got back pointing out that their active users were, in fact, more active than users on other similar platforms. Soooo… there’s that.
Nonetheless, despite growing at breakneck speeds (in revenue terms), Slack still hasn’t managed to fully reign in its losses. Could it emerge out of this pandemic as a flying horsie? It’s possible. But if I were a betting man, I’d skip this one.
Okay, there are 85 more horsies we need to analyze. But we are running out of time. So we will wish all the horsies the best of luck and skip to the investor call.
Because when Softbank’s investors asked Masayoshi Son — the CEO of Softbank to explain the fund’s abysmal performance he reportedly said and I quote — “Jesus Christ was also misunderstood”
Expert Interpretation: I don’t think Masa Son is claiming that he can walk on water and turn water into wine. I think what he’s alluding to is slightly different. You see, Son has a reputation for coming back from the dead. Not literally, but metaphorically. At the height of the dot com bubble, he was the richest man in the world. When internet companies went bust in 2000, he almost went bankrupt. But then he survived and eventually turned out to become one of the richest, most influential men in the world. Maybe he can do it again. And that’s what he’s trying to tell us.
Either way, we hope Masa Son and all his 88 horsies come out with flying colours and make this world a better place.
Also, here's an infographic on some of the Softbank's big investments.
Until next time…