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SoftBank

SoftBank suffers another writedown after Wag stake sale

Vision Fund invested around $300m in the dog-walking startup in early 2018

SoftBank Group's Vision Fund has agreed to sell its nearly 50% stake in Wag, bought in 2018 as part of a planned $300 million investment in the dog-walking startup, back to the struggling company. (Photo courtesy of Wag)

PALO ALTO, U.S. -- SoftBank's Vision Fund readied for another writedown on a tech investment on Tuesday after it agreed to sell its nearly 50% stake in dog-walking startup Wag back to the company at a price that likely values the venture at far less than when it made its initial investment.

Los Angeles-based Wag pairs dog owners with available nearby walkers. It received the first installment of a planned $300 million investment from SoftBank’s tech-heavy Vision Fund in January 2018, three years after the company was founded, in a deal that valued Wag then at around $550 million, a source familiar with the deal told Nikkei.

Terms of the sale, first reported in The Wall Street Journal, have not been revealed. But it comes as Uber, WeWork and other unprofitable companies backed by SoftBank have also suffered a collapse in valuations.

SoftBank CEO Masayoshi Son indicated his concerns about Wag to investors last month, when SoftBank plunged to its first quarterly loss in 14 years, hit by a massive $9 billion loss at the Vision Fund.

"Is there any other similar concern [to WeWork]? In fact, yes, there is," Son said. "Like a dog-walking company and other portfolio companies, we may see similar problems surfacing."

Another Vision Fund investment to suffer recently is OneConnect Financial Technology, a Chinese startup, that filed this month for a U.S. share offering at a valuation approximately $2.7 billion lower than when the Vision Fund invested in it last year.

Wag went through a rapid expansion phase after last year's capital injection from SoftBank but struggled to keep up with competition and has gone through multiple rounds of layoffs and management changes.

Wag's CEO left last month and was replaced by the company's 29-year-old vice president of product and partnerships, Garrett Smallwood.

"We are amicably parting ways with SoftBank. ... We thank the Vision Fund for their support in the company to date," Smallwood wrote in an internal memo to employees on Monday.

SoftBank will also give up its two board seats at Wag, which is now reportedly seeking a buyer. SoftBank has made profitability a priority among its Vision Fund investments.

SoftBank declined to comment and Wag did not respond to requests for comment.

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