A group of SoftBank shareholders has demanded an internal probe into the actions of company president and COO Nikesh Arora for alleged conflict of interest and poor business decisions and has also asked for his "possible dismissal".
Among the deals highlighted by stakeholders are some of the investments made by Arora in his personal capacity as well as on the behalf of SoftBank.
Interestingly, the letter cited several reports published by VCCircle to bolster their case against Arora.
Here’s a quick look at a few of the deals Arora led in India.
In 2014, SoftBank led a $90 million round of investment in the two-year-old startup founded by a dozen IIT Mumbai students in exchange for a 32.5 per cent stake.
Six months after the investment, VCCircle reported that SoftBank was exploring an exit from Housing.com, as the realty portal had embarked on an unbridled expansion and marketing spree under the leadership of the then CEO Rahul Yadav, who was later ousted following his public spats with investors and media.
The SoftBank investors have in the letter said: “……Another poor investment choice was SIMI (SoftBank Internet and Media) acquiring a stake in Housing.com… The investment turned sour as a result of poor management and personality conflict with Housing's (then) CEO (Rahul Yadav).”
Citing another VCCircle report, the investors said that Housing’s failure resulted in part because of an “imprudent investment without adequate diligence”. “This has put Softbank, the largest owner of Housing, in a delicate spot,” it added, citing the same VCCircle report.
“After Housing CEO was dismissed by the board, SIMI sought to extricate itself by selling its interest in the company. While SIMI is reportedly seeking $350 million from a buyer, the best offer to date has been $175 million with little interest from others,” the investors said.
Citing an article in The Wall Street Journal, the letter alleged conflict of interest on the part of Arora as he led an investment by the Japanese conglomerate into the Indian ecommerce company while he already held a stake in it.
In May 2014, Snapdeal raised $100 million in an investment round that valued it at $1 billion. "Only five months later, Mr. Arora opened SoftBank's wallet to invest an additional $627 million in Snapdeal—resulting in a valuation of $2-3 billion. While this rushed transaction reflects the same lack of due diligence demonstrated in the DramaFever (which offers Korean TV programmes online for English-language viewers; SoftBank’s investment in the video site is said to have turned sour) and Housing.com deals, the Snapdeal investment raises other concerns due to Arora's personal interests,” the letter said.
Within a year after putting in $90 million in Snapdeal, Arora led yet another investment round in the online marketplace that raised $500 million at a time when Snapdeal co-founder and CEO Kunal Bahl stated that the firm was extremely well funded for a few years. “If Snapdeal did not need this additional money from SoftBank and others, why did Mr. Arora feel the need to provide it?" the investors asked.
Citing yet another VCCircle report, the investors have said in the letter: “Mr. Arora's actions over the last year raise doubts whether his interests are aligned to those of SoftBank. In April 2015, for example, Mr. Arora resigned from the Snapdeal board without an explanation.”
Another VCCircle reportcited by investors’ concerns Baer Capital co-founder Alok Sama’s appointment as a senior executive at SoftBank. It questioned the decision by SoftBank to pay Sama a compensation of $6 million for his consulting work for six months, mainly for helping the conglomerate to invest in Snapdeal.
“Mr Sama’s fees were allegedly paid through a company named Kensington Capital International Ltd which we believe to be based in the British Virgin Islands. The use of an entity based in BVI to arrange deals in India is concerning. This is especially so when payment made to Alok Sama for his consulting are reported to be extraordinarily large for only six months of work. And after these payments were made, Sama was hired by SoftBank,” the investors said in the letter.