Corp. Chief Executive Officer Masayoshi Son speaks during a joint announcement with Toyota Motor Corp. to make new venture to develop mobility services in Tokyo, Japan, 04 October 2018.
Alessandro Di Ciommo | NurPhoto | Getty Images
SoftBank has decided to let satellite internet provider OneWeb file for bankruptcy Friday rather than pump billions of dollars into the startup to save it, according to people familiar with the matter.
SoftBank, which has already invested $2 billion into OneWeb, was in talks to provide more capital to the satellite operator but ultimately backed down after making the decision it needs to save capital instead of spending more, said the people, who asked not to be named because the discussions were private. OneWeb plans to file for Chapter 11 bankruptcy on Friday when markets close in New York at 4 p.m. E.T., one of the people said. Spokespeople for SoftBank and OneWeb declined to comment.
The Financial Times first reported that OneWeb would file for bankruptcy.
The decision dovetails two other SoftBank decisions this month: backing away from a $3 billion WeWork tender offer and selling up to $41 billion in assets, likely including some of its Alibaba shares, to shore up its balance sheet. Cutting bait with OneWeb, which failed to merge with Intelsat in 2017 and has unsuccessfully searched for new mergers ever since, is also a distinct counterexample to WeWork, which SoftBank bailed out in October instead of letting the company run out of cash.
SoftBank has morphed from a Japanese and American telecommunications company, owning wireless networks in Japan and the U.S. (more than 80% of Sprint) to a sprawling technology holding company, led by its $100 billion mid-to-late stage venture capital fund called the Vision Fund.
The moves to stop spending come as coronavirus quarantines threaten to wreak havoc on revenue for many of the SoftBank Vision Fund’s largest investments, including Uber, WeWork, Grab, Didi Chuxing and Ola. SoftBank’s profit in its last two quarterly earnings was completely wiped out from Vision Fund losses. The next two quarters almost certainly won’t be pretty either.
While SoftBank CEO Masayoshi Son’s reputation since the founding of the Vision Fund about three years ago has been to push his investments to spend aggressively. He once told WeWork founder Adam Neumann that he wasn’t “crazy enough” with his expansion ideas.
But SoftBank has drastically altered that strategy this year to ensure the company is in position to weather a global downturn. Vision Fund head Rajeev Misra told CNBC earlier this month he planned on dozens of the fund’s portfolio companies to go public in the next 18 to 24 months. Those comments were made just before the huge market selloff of the past three weeks, which have added significant doubt to when an IPO window will reopen. In the meantime, many private companies may be counting on SoftBank for additional funding to get them through a rocky first and second quarter.
It all adds up to SoftBank having to make some difficult funding decisions, including allowing OneWeb to file for Chapter 11 bankruptcy later today, putting about 500 employees at risk of losing their jobs, three of the people said. OneWeb had aimed to use satellite technology to provide rural and remote regions with broadband access that couldn’t be reached by wireless networks. It has raised about $3.4 billion in funding with investors including Richard Branson’s Virgin Group and Qualcomm. SoftBank is its largest investor.
– CNBC’s Michael Sheetz contributed to this report.
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