Update: SoftBank spokesperson sent MediaNama statements from the SoftBank Group, Nikesh Arora and Masayoshi Son:
We can confirm we are in receipt of a letter from a US law firm claiming to represent unidentified shareholders. The letter makes unsubstantiated allegations against Mr. Arora.
The Board takes its duties seriously and is in the process of reviewing the letter. Mr. Arora remains a highly valued leader with proven investment abilities and we are confident he will continue to make great contributions at SoftBank in the years ahead.
“I have complete trust in Nikesh and one thousand percent confidence in him and know he will continue to do great things for SoftBank in the future.”
Statement from Mr. Arora (President & COO)
“I take my fiduciary responsibilities seriously and have acted appropriately and in the best interest of shareholders throughout my tenure at SoftBank and Sprint, just as I have conducted myself throughout my professional life. I am completely confident the allegations in the letter are baseless.”
Earlier: A group of investors have sent letters to the boards of SoftBank and Sprint calling for a probe and possible dismissal of Nikesh Arora, the second in command at SoftBank, according to a report by Bloomberg. A SoftBank spokesperson confirmed to MediaNama that the board received such a letter but declined to give a further statement.
The letter, dated January 20 which was not made public, came from a US-based law firm Boies Schiller & Flexner and did not identify the investors. The report added that the letter questioned Arora’s conflict of interest as a senior advisor to private equity firm Silver Lake. It also questioned Arora’s “poor investment performance” including SoftBank’s investment in real estate portal Housing.
The letter also asked the boards of SoftBank and Sprint for an independent firm to review Arora’s conduct. SoftBank, on its part, called the letter “unsubstantiated allegations” from “unidentified shareholders.” The report also quoted Masayoshi Son, chairman of SoftBank, that he had “complete trust in Nikesh and a thousand percent confidence in him”.
The letter contends that Arora is getting compensated by Silver Lake for helping with potential technology company investments that are similar to the investments he is supposed to be making for SoftBank.
Elevation to head of global operations
In March, SoftBank Group split into two organizations which will look into domestic and global operations. Nikesh Arora was made the CEO of the global operations. The investment securities of global subsidiaries and affiliates such as Starburst Ⅰ, Inc. (a holding company that holds the shares of Sprint Corporation) and Alibaba Group Holding Limited would be transferred to the global operations management company.
In May 2015, Arora was made chief operating officer and president of the SoftBank Group.
Prior to SoftBank, Arora served as senior vice president and chief business officer of Google. He was also senior advisor of value creation at Silver Lake Partners and also served as chief marketing officer and a member of the management board of T-Mobile International AG & Co. In the past, he had also worked at Deutsche Telekom AG, Putnam Investments, Fidelity Investments, Colgate-Palmolive Co. Arora had also founded T-Motion Plc, a mobile multimedia subsidiary of T-Mobile International. He had also served as a non-executive director of India telecom major Bharti Airtel from 2008 to 2014.
SoftBank’s recent investments in India
– In January, Housing announced that it has secured a fresh round of funding of Rs 100 crore from Softbank, its largest investor. Housing also raised $90 million from Softbank with participation from Falcon Edge and other unnamed investors. At the time the company was valued at Rs 1,500 crore. Since the tumultuous exit of Housing’s founder Rahul Yadav as CEO in July 2015 and subsequent restructuring in the company, Housing’s valuation has fallen to about $50 million. Housing also cut its headcount significantly after it came under new management.
– In November 2015, hyperlocal delivery service provider Grofers raised $120 million in a round of funding from SoftBank, Russian entrepreneur Yuri Milner, with participation from existing investors Tiger Global and Sequoia Capital. In January, Grofers shut down its services in 9 cities citing low acceptance. The company had expanded to these Tier II cities, including Ludhiana, Bhopal, Kochi, Coimbatore and Visakhapatnam in September 2015. Grofers will now operate in 17 cities.
– In November 2015, online cab aggregator Ola raised Series F funding worth $500 million from Baillie Gifford, Falcon Edge Capital, Tiger Global, SoftBank Group, DST Global and China’s Didi Kuaidi. In September 2015, Ola raised raised $225 million in funding from existing investors and new investors. At this time, Tiger Global invested Rs 296.9 crore, Softbank Rs 384 crore, Falcon Edge Rs 514.7 crore, while the others contributed less than Rs 25 crore each.
– In August 2015, ecommerce marketplace Snapdeal raised $500 million in funding led by Foxconn, Alibaba and existing investor Softbank, with participation from other existing investors Temasek, BlackRock, Myriad and PremjiInvest.
– In the same month, branded budget hotel rooms service OYO Rooms raised $100 million in a funding round led by SoftBank group and participation from existing investors Greenoaks Capital, Sequoia Capital and Lightspeed India.