SoftBank’s long-term plan abruptly cut short

June 21, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

The heir has gone out of SoftBank. Nikesh Arora quit the Japanese tech and telecom conglomerate less than two years after he was hired and little more than 12 months after he was promoted to president. The ex-Googler invested billions of the company’s money and was paid extravagantly as he staked a claim to take over from Masayoshi Son. The succession mess leaves SoftBank and its mercurial founder harder than ever to read.

This looks like another all-too-predictable case of a tycoon refusing to let go of the company he created. Son says he planned to step back next year when he turned 60, but recently decided to carry on for at least another five years and “work on a few more crazy ideas.” With no prospect of taking over anytime soon, Arora – who received over $200 million in compensation over the last two years – decided to move on. He will remain an adviser, and has sold the $500 million of SoftBank stock he bought last year to Son at a small loss.

Not all shareholders will be sorry to see him go. In a short period, Arora oversaw some bold bets, including a $1 billion stake in Korean online retailer Coupang as well as the backing of Indian e-commerce group Snapdeal and Asian ride-hailing apps Ola and Grab. SoftBank’s board on June 20 dismissed criticisms brought by unnamed investors accusing Arora of conflicts of interest and poor investment performance.

While it’s too soon to say whether the startups he championed will justify their valuations, SoftBank’s shakeup coincides with signs of financial restraint. It recently raised $10 billion by selling some shares in Chinese online retailer Alibaba. At the same time as it announced Arora’s departure, the $67 billion Japanese group offloaded its controlling stake in games developer Supercell in a deal that values the Clash of Clans maker at $10.2 billion. The proceeds will reduce SoftBank’s debt and ease some of the strain caused by troubled U.S. mobile operator Sprint.

With so many disparate holdings and moving parts, investors can only be further confused by the big personnel change. The one thing they can be sure of for now is that once again their fate rests entirely in Son’s hands.

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