By Liz Hoffman and Phred Dvorak 

SoftBank Group Corp.'s biggest investors are putting pressure on the tech conglomerate over its governance and for a string of bad investments in its $100 billion investment fund.

Investors including Capital Group, hedge fund Tiger Global Management LLC and Southeastern Asset Management Inc. have privately criticized the company over losses in the Vision Fund in recent weeks, people familiar with the matter said.

The investors have also criticized SoftBank's plan to help raise cash for a second Vision Fund by lending billions of dollars to its own executives, the people said. The Wall Street Journal reported in August that SoftBank planned to lend up to $20 billion to Chief Executive Masayoshi Son and other top executives to invest in the fund, helping a fundraising effort that has stalled.

In conversations with SoftBank executives and investor-relations staff, those shareholders and others -- including AllianceBernstein LP and Odey Asset Management -- have criticized the loans as risky and said they could create conflicts of interest between the executives and investors. In addition to Mr. Son, the borrowers include several SoftBank board members who also hold senior roles at the Vision Fund. The company hasn't disclosed details of the arrangement to investors.

SoftBank declined to comment on its conversations with shareholders. Mr. Son has said he is aware of the skepticism toward his company's stock. In recent quarters he has started out each earnings press conference by saying the group's revenue and profit figures are meaningless, and emphasizes more positive numbers such as the value SoftBank has created for its shareholders, measured by the value of its equity holdings minus debt.

Capital Group -- one of SoftBank's largest shareholders with a 2% stake as of Sept. 30 -- and AllianceBernstein have told SoftBank executives that Mr. Son shouldn't participate in the loan program, people familiar with the matter said. Some investors shared their concerns during meetings with Mr. Son and Navneet Govil, the Vision Fund's finance chief, at the company's quarterly earnings presentation last month, some of the people said.

Shareholders have long had doubts about SoftBank as it morphs from a mobile phone carrier to a technology-investment company with stakes in Alibaba Group Holding Ltd. as well as dozens of startups including Uber Technologies Inc. and its Chinese peer Didi Chuxing Technology Co.

SoftBank invested $25 billion in the Vision Fund and raised the rest from outside investors. The fund is now in trouble, writing down its bets on WeWork, Uber, Slack Technologies Inc. and smaller startups including dog-walking app Wag, home-goods retailer Brandless and robotic-pizza maker Zume.

The Vision Fund reported an $8.8 billion loss in SoftBank's most recent quarter, which ended Sept. 30. The fund's value is still up since its 2017 launch, but much of the 29% cumulative gains it reported in March has been lost, people familiar with the matter said.

SoftBank's shares have fallen 30% since late July. Several brokerages have lowered their target prices for SoftBank shares, but many still have "buy" ratings on the stock.

Many value-oriented funds, who try to buy shares on the cheap, invested in SoftBank because its shares are worth just $80 billion, far below the value of the company's assets. SoftBank's stake in Alibaba alone is worth $125 billion.

Companies that trade below the value of their assets can be vulnerable to a shareholder revolt or an activist investor, though SoftBank is insulated somewhat by Mr. Son's 25% ownership stake.

A spokesman for Southeastern -- which has waged activist campaigns before -- declined to comment, as did representatives for Capital, Tiger, AllianceBernstein and Odey.

Despite writing down its bet on WeWork, SoftBank's shareholder value actually grew by 1.4 trillion yen ($13 billion) to 22.4 trillion yen during the quarter ended September -- largely because of an appreciation in Alibaba shares, Mr. Son said. The big losses at the Vision Fund -- including a write-down in the value of Uber shares -- comprised only about 1.3% of that total shareholder value, he said.

"I know if I explain things this way plenty of people will say, there's Son just picking the good parts to talk about again," Mr. Son said at the company's earnings press conference in early November. "But it's a fact."

Write to Liz Hoffman at liz.hoffman@wsj.com and Phred Dvorak at phred.dvorak@wsj.com

 

(END) Dow Jones Newswires

November 26, 2019 05:44 ET (10:44 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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