Breakingviews - TikTok calls the tune for SoftBank's comeback tour
HONG KONG (Reuters Breakingviews) - Will SoftBank get its groove back? After WeWork's collapse, boss Masoyoshi Son desperately needs a hit. His bet on the $78 billion Chinese outfit behind TikTok, the popular video app, looks the most promising. But TikTok’s brewing troubles in Washington and beyond make a chart-topping initial public offering difficult to envision.
SoftBank is suffering from a string of flops. WeWork's spectacular implosion required a SoftBank bailout. Accompanied by falling valuations at other holdings, the net result may be a $5 billion-plus write-down in the current quarter, Bloomberg reports. The Saudi-backed $100 billion Vision Fund that SoftBank manages has seen two of its most high-profile bets, Uber Technologies and Slack, slide 22% and 42% respectively since going public. Even dog-walking app Wag is up for sale, according to Recode, and could fetch less than the $650 million price at which the Vision Fund invested.
ByteDance is a potential remedy to all this bad news. The Beijing-based firm more than tripled its valuation last October from the previous year after it raised $3 billion from SoftBank and U.S. heavyweights including KKR. Thanks to the 1.5 billion monthly active users across its news and media apps at home and abroad, TikTok hiked its revenue target for 2019 by a fifth, to 120 billion yuan ($17 billion). And the company reckons it can turn profitable in the second half of the year.
That will be music to Son's ears. Following the WeWork debacle, SoftBank’s founder appears to be pulling back from risky bets and prioritising profits and governance. Shoring up confidence from investors with at least one big win will be crucial for Son, who is struggling to raise money for a second Vision Fund.
ByteDance says it has no immediate plans to go public. That looks prudent: TikTok's popularity has drawn regulatory and political scrutiny worldwide. Just this month, U.S. Republican Senator Marco Rubio called on parents to delete the app over security concerns. In India, ByteDance's top overseas market, TikTok was temporarily banned last year and still faces concerns over data privacy and inappropriate content. SoftBank may not be headlining a comeback tour anytime soon.
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