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Arora Exits SoftBank: Pay Attention to the Deals, Not the Dealmaker
Jacky Wong
Updated June 22, 2016 9:48 a.m. ET
SoftBank 9984 -1.43 % is on a massive asset-shedding spree, including its future chief executive. A leaner, meaner company should result.
Nikesh Arora, former Googler and heir apparent of the Japanese internet and telecommunications giant, shocked investors Tuesday by saying he would step down from his role as president and chief operating officer. The official reason is that SoftBank founder, Masayoshi Son, isn’t quite ready to relinquish the reins.
That probably isn’t the entire story. The departure comes at the conclusion of an internal investigation into Mr. Arora’s conduct on deals in which SoftBank made investments alongside a private-equity firm with which Mr. Arora maintained an affiliation. SoftBank’s board cleared him of misconduct. But his simultaneous departure highlights the frictions his management style may have caused.
From a company strategy perspective, his sudden departure perhaps isn’t so sudden. SoftBank seems to have taken a different tack recently, shedding assets with the aim of reducing its debt load.
That same day, SoftBank officially announced the sale of its majority stake in Finnish game maker Supercell to China’s Tencent, valuing the company at $10.2 billion, creating a handsome profit. SoftBank reportedly raised its stake to 73% last year in the maker of “Clash of Clans” at a valuation of $5.25 billion. The Japanese firm said earlier it would sell around $10 billion of its shares in Chinese e-commerce giant Alibaba Group. BABA 1.91 % It will also get rid of most of its stake in Japanese game maker GungHo Online Entertainment. 3765 0.72 %
These disposals hint that SoftBank is turning away from the investment spree spurred by Mr. Arora in the past two years. Instead, the nearly $20 billion raised from asset sales could be put to fix the balance sheet of debt-laden Sprint S 1.12 % . The U.S. telecom firm jumped nearly 8% Tuesday.
SoftBank’s own share price has fallen 24% since Mr. Arora joined from Google in 2014. The struggling Sprint, an acquisition made before Mr. Arora arrived, was the main drag, but his investments into startups received heavy criticism from investors. SoftBank has already invested $2 billion in India, Mr. Arora’s home country, with plans to put in more than $10 billion over the next decade. It was one of those deals, in Indian real-estate portal Housing.com, for example, that a group of SoftBank and Sprint investors accused the company in a letter of engaging in “an imprudent investment without adequate diligence,” something the firm disputed.
Mr. Arora’s departure seems secondary to the bigger things happening at SoftBank. The company’s shares rose Wednesday, probably on the Supercell sale, which generated $1 billion more than expected. The more the company disposes, the more love it wins back from investors.
Jacky Wong
Updated June 22, 2016 9:48 a.m. ET
SoftBank 9984 -1.43 % is on a massive asset-shedding spree, including its future chief executive. A leaner, meaner company should result.
Nikesh Arora, former Googler and heir apparent of the Japanese internet and telecommunications giant, shocked investors Tuesday by saying he would step down from his role as president and chief operating officer. The official reason is that SoftBank founder, Masayoshi Son, isn’t quite ready to relinquish the reins.
That probably isn’t the entire story. The departure comes at the conclusion of an internal investigation into Mr. Arora’s conduct on deals in which SoftBank made investments alongside a private-equity firm with which Mr. Arora maintained an affiliation. SoftBank’s board cleared him of misconduct. But his simultaneous departure highlights the frictions his management style may have caused.
From a company strategy perspective, his sudden departure perhaps isn’t so sudden. SoftBank seems to have taken a different tack recently, shedding assets with the aim of reducing its debt load.
That same day, SoftBank officially announced the sale of its majority stake in Finnish game maker Supercell to China’s Tencent, valuing the company at $10.2 billion, creating a handsome profit. SoftBank reportedly raised its stake to 73% last year in the maker of “Clash of Clans” at a valuation of $5.25 billion. The Japanese firm said earlier it would sell around $10 billion of its shares in Chinese e-commerce giant Alibaba Group. BABA 1.91 % It will also get rid of most of its stake in Japanese game maker GungHo Online Entertainment. 3765 0.72 %
These disposals hint that SoftBank is turning away from the investment spree spurred by Mr. Arora in the past two years. Instead, the nearly $20 billion raised from asset sales could be put to fix the balance sheet of debt-laden Sprint S 1.12 % . The U.S. telecom firm jumped nearly 8% Tuesday.
SoftBank’s own share price has fallen 24% since Mr. Arora joined from Google in 2014. The struggling Sprint, an acquisition made before Mr. Arora arrived, was the main drag, but his investments into startups received heavy criticism from investors. SoftBank has already invested $2 billion in India, Mr. Arora’s home country, with plans to put in more than $10 billion over the next decade. It was one of those deals, in Indian real-estate portal Housing.com, for example, that a group of SoftBank and Sprint investors accused the company in a letter of engaging in “an imprudent investment without adequate diligence,” something the firm disputed.
Mr. Arora’s departure seems secondary to the bigger things happening at SoftBank. The company’s shares rose Wednesday, probably on the Supercell sale, which generated $1 billion more than expected. The more the company disposes, the more love it wins back from investors.
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