Crisis abounds.
Across SoftBank, Twitter, and Klarna, I hypothesise over how prepared everyone is.
Goood morning beautiful people! I had a great hot yoga session last night, which put me to a restful sleep and I cannot wait to tackle the day.
Daily quote:
“Now, here, you see, it takes all the running you can do, to keep in the same place.“
— Alice in Wonderland, The Red Queen Effect
What’s the Vision?
Vision Fund posted a historic loss of $27.6bn. Gosh dang. Causes cited included the dip in tech stocks, increasing interest rates and regulatory crackdown in China.
Executive salaries have taken a dive. The CFO of SoftBank went from $3.7mn to $2.3mn and the Telecoms Operations Lead went from $4.9mn to $4.6mn. Anyways, all these numbers seem trivial in comparison to how much they lost, mostly driven by Didi and Coupang in the fourth quarter.
SoftBank had even used stakes in Alibaba and Arm to get more loans to raise new funds for investment. They are tied with a loan-to-value ratio of 20.4%, exceeding the 25% threshold they set for themselves.
Weird shit though: Vision Fund Head Rajeev Misra’s pay more than doubled when SoftBank reported its previous wort performance on record two years ago. If that was based off of any anticipation of future earnings, it has proven moot.
Beef with shareholders?
Ahhh this was bound to be. Twitter has declined to take Silver Lake CEO Egon Durban off its board. This comes after the company’s investors voted against his re-election at this week’s shareholder meeting.
Concerns were raised by the two largest shareholder advisors: Institutional Shareholder Services and Glass Lewis. They claimed that Egon sits on too many boards. Lol if they have that concern over Egon, I wonder what concerns they may have over Elon. ahah pun not intended at first, but I had to take advantage of that one. Egon sits on 7 public boards, having added 1 from last year.
Egon offered his resignation after the vote, but Twitter did not accept it. The company cited his industry knowledge, “unique perspective,” and experience with M&A as reasons why they needed him. They made an agreement with him to reduce his board commitments to 5 public company boards by May 25th of next year.
Egon was brought on in March of 2020 as part of a co-operation agreement between Twitter and Elliott Management, the chief force behind Jack’s resignation. Apparently he has personal ties to Elon Musk, as he was one of the first Elon contacted after taking a stake in the company.
The boardroom drama gets messy as uncertainty arises over Elon’s intentions to close the deal. Elon let a $6.25bn margin loan commitment backed by his shares in Tesla lapse. Seems like he is not willing to put as much on the line as he previously led us to believe. Perhaps coming down from the manic experience of the past weeks. This means, if he is still to close the deal, he would need to raise far more cash to make up for it.
He also said some weird stuff of the deal being temporarily on hold pending clarity over amount of fake/spam accounts of Twitter. Sounds like a bit of a cop-out to me.
More troubles.
More layoffs in tech land. This time, Klarna.
This is the company’s first mass jobs cut. Net loss in the first quarter increased four times, cash outflows increased significantly, and the buy now, pay later business model is also being questioned. Klarna raised a down-round with a 20-50% valuation drop.
These are things much to be expected as a natural flow of events though. The fact that they followed through with the raise despite the down-round is actually a positive indication to me that it was thought through.
Despite the 10% cut of their workforce, which should have probably come earlier or at least not all at once, compared to other tech companies, hasty decisions are few. CEO Siemiatkowski seems to be well-planned for the times ahead. So who knows? I think there is room to think his optimism is well-founded.
To quote the CEO himself: “I’ve had a lot of bruises in my life.”
Sebastian founded Klarna 18 years ago with 2 business school friends. His idea was rejected at a business school pitching event (ah fuck those things ahah I have no intention of ever setting foot in one). Despite setbacks, in 2013, Siemiatkowski made Klarna one of Sweden’s first unicorns. 2 years afterwards, they faced a crisis even worse than today’s.
In light of the fall in tech stocks, he has decided to stay private for now, and focus on short-term profitability.
This market shift is an external circumstance no tech founders could have controlled. But what they can control is how they deal with it. Those who have struggled for real will know how to come out unscathed. I have faith Siemiatkowski will be one of them.
That’s it for today! Have an amazing day!
With love,
Angeline
Resources:
“Turn off the taps.” The Bloomberg Open, Europe Edition, Bloomberg, May 31, 2022.
Criddle, Cristina & Bradshaw, Time & Wiggins, Kaye & Fontanella-Khan, James. “Twitter refuses to remove Silver Lake’s Egon Durban from board.” The Financial Times, May 27, 2022.
Milne, Richard. “Klarna boss puts brave face on buy now, pay later problems.” The Financial Times, May 27, 2022.
Slodkowski, Antoni. “SoftBank cuts top executives’ pay after Vision Fund posts record loss.” The Financial Times, May 30, 2022.
“Editor’s Picks: May 30th 2022.” The Economist Podcasts, The Economist, May 31, 2022.