A group of unnamed stakeholders in the Japanese multinational SoftBank Group Corp has made serious allegations against its president and COO Nikesh Arora in a letter sent to the bank through a US-based law firm. Mounting a scathing attack on Arora, one of the high profile professionals globally and a leading investor in Indian startups, the investors have accused him of poor business decisions and a “series of questionable transactions”.
VCCircle.com has a copy of the letter.
In the letter—dated January 20th and signed by Matthew L Schwartz, a partner with US law firm Boies Schiller & Flexner LLP— unnamed shareholders have alleged that directors of SoftBank failed to exercise due care in the appointment of Arora in key executive and board-level positions. Arora is seen as the heir to apparent to founder Masayoshi Son.
The development was first reported by Bloomberg.
Softbank, however, has defended Arora. The Bloomberg report quoted Son as saying: “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.”
The letter alleged conflict of interest and poor business decisions on the part of Arora especially with regard to two SoftBank investments that he led in India – one in housing search portal housing.com and the other in ecommerce marketplace Snapdeal.
The stakeholders’ letter cited several VCCircle reports, including the one that said that the investment in housing.com had put Softbank “in a delicate spot”.
As an instance of conflict of interest, the stakeholders, said Arora held a personal stake in Snapdeal even as he spearheaded an investment by SoftBank into the company.
The letter also cited another VCCircle report on 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. “After these compensations were made Sama was hired by SoftBank,” it said.
The stakeholders also raised questions about Arora’s links to private equity firm Silver Lake Partners. “Arora’s relationship with private equity—where he presently serves in a senior role at Silver Lake Partners, advising on potential technology company investments—competes with his position at SoftBank, where he has an obligation to advance SoftBank’s interest in making similar types of investments,” the letter said.
The sharply worded letter questioned the rationale behind $138 million compensation made by SoftBank to Arora. It also raised questions about whether adequate disclosures were made about Arora’s purchase of SoftBank shares worth $438 million in his personal capacity.
Arora became the largest insider to buy such a huge chunk of SoftBank shares in at least 12 years’ of the company’s history.
The investor group demanded SoftBank to initiate an independent inquiry into the allegations within 60 days. The letter threatened to approach government and regulatory authorities in the US and Japan if SoftBank failed to do so.
Arora, according to aforementioned Bloomberg report, dismissed the allegations against him.