News

Aug 16, 2023

The Downfall Of A $2 Billion SoftBank

View Inc. was supposed to be the greatest office enhancement since air conditioners: its smart windows could tint the windows of an entire building according to the position of the sun, promising to

View Inc. was supposed to be the greatest office enhancement since air conditioners: its smart windows could tint the windows of an entire building according to the position of the sun, promising to keep rooms cooler, and generate vast energy savings. With built-in, transparent circuit boards, the panes also served a dual purpose, transforming into giant computer or presentation screens. Investors like SoftBank and the sovereign wealth funds of New Zealand and Singapore poured in more than $2 billion.

“This is a product and a company that’s going to disrupt an entire industry,” CEO Rao Mulpuri told CNBC when View went public via a SPAC in 2020, adding that it was on track to generate $1 billion in revenue, “and start a movement toward smarter, healthier, more connected buildings.”

But such ambitions have been shattered amid fraud charges and a decrepit share price at the Milpitas, California-based company. The company reportedly laid off almost a quarter of its workforce earlier this year. And last week, View settled charges brought by the Securities and Exchange Commission that alleged its former CFO misstated the costs of replacing “many” defective windows by $28 million. (The agency did not impose penalties against the company because it self-reported the misconduct.)

Despite cost cutting and fundraising efforts, View appears to be facing an existential crisis: It has received warnings from NASDAQ that it could be delisted, and the company recently said it doesn’t have enough money to fund operations beyond September. After its stock price peaked at $12.49 in 2021, it is now trading at 13 cents, as of Monday — valuing the company at only $33 million.

“It’s an embarrassment,” said Greg Bohlen, a View investor through his firm Union Grove Venture Partners. “It should never have been a public company.”

Bohlen, who first backed View in 2013 on the belief that the underlying technology was solid and would be adopted by major landlords at scale, said that he urged View’s executives not to go public: development of the glass was more costly than expected, and after convincing landlords to install its windows, the Covid-19 pandemic decimated the construction industry. Beyond this, the company had clear issues with accurate financial reporting — “all of which made it a horrible public company,” Bohlen said.

“It’s an embarrassment...It should never have been a public company.”

View’s CEO Rao Mulpuri told Forbes he doesn’t regret taking the company public because the SPAC merger raised $800 million. Instead, he said the company’s current issues stem from bad press about the accounting restatement — “the main kink in how things transpired” — and the macro freeze over the office sector, prompting a pivot to focus on multifamily properties. The window defect, he added, is limited to an older model that hasn’t been sold since 2019.

Mulpuri is in talks to raise another $150 million senior convertible note with existing investors, which he insists will take the company to profitability. “I've done this since 2008,” he said. “Anytime a company is facing financing, it is an existential threat if you don't raise that financing, but the financing is a means to build the business.”

CEO Rao Mulpuri has led the company since 2008.

SoftBank, the New Zealand Superannuation Fund and Singapore’s GIC sovereign wealth fund, which is no longer an investor, declined to comment.

Scott Rechler, a View board member and CEO of RXR Realty, which invested $200 million in the company last year, said View retains substantial value in its hundreds of patents and vast R&D operation. In addition, Rechler said View's glass has become more affordable since a tax credit for "dynamic glass" was included in Biden's Inflation Reduction Act passed last year. “We thought this was a great company with a broken capital structure," he said, adding that View has “materially reduced its burn rate, so what would bring them to profitability in the past is now much less than it would have been before.”

View is one of several high profile companies to go public via SPAC merger only to fight for survival. Dozens of other heavily-funded SPAC-listed companies like WeWork and Latch now trade for pennies. Others are fast running out of cash or going bankrupt, like Richard Branson’s Virgin Orbit Holdings, once valued at $3 billion and backed by Boeing. But at View, accounting mishaps appear to have played an outsized role in torpedoing the company’s stock price, said Pavel Molchanov, an analyst at Raymond James who covered the company. “View is one of many venture-backed companies that in retrospect should have stayed private for longer,” Molchanov said.

With a vision to cover the nation’s commercial buildings in climate-friendly, multi-purpose windows, View spent years developing the technology behind the product and has since been installed in more than 400 buildings; it currently has around 100 customers. Launched in 2008 as Soladigm, the company opened its manufacturing plant in Olive Branch, Mississippi, in 2010, a $130 million endeavor that reportedly promised to bring 300 jobs to the area.

It attracted customers ranging from Amazon to Deutsche Bank, and installations in hundreds of buildings, including San Francisco International Airport’s Terminal 1. View was an attractive target for real estate and tech investors alike, drawing hundreds of millions of dollars from BlackRock, Madrone Ventures and Khosla Ventures. Part of the appeal was that the capital could be put toward investors’ ESG requirements. Madrone and Khosla did not respond to requests for comment.

In 2017, nearly a decade after it launched, Mulpuri announced a $200 million funding round led by TIAA, that valued View at $1 billion, though he warned investors and customers that it planned to continue losing money. “This company will be in a capital-raising mode for the foreseeable future,” Mulpuri told the Wall Street Journal at the time.

A year later, SoftBank poured in $1 billion, and by 2020, the company went public via a SPAC merger with a blank check company sponsored by Cantor Fitzgerald which valued it at $2 billion. Mulpuri told CNBC at the time that View’s glass cost building owners 50 percent more than typical panes, after installation, but would demand higher rents from office tenants, and for tenants, generate a better work environment for workers. “Think about this like air conditioning, when it was first introduced about 50 years ago,” Mulpuri said. “It was a premium, but now we can’t do without it.”

But after peaking at $12.49 in January 2021, View’s stock price nearly halved a few months later. In November 2021, the company reported to the SEC that it had launched an internal investigation into whether it had provided inaccurate financial information to the agency. According to the SEC order filed this month, View disclosed warranty liabilities of $22 million to $25 million due to the costs linked to replacing windows affected by a defective sealant, but it didn’t include shipping and installation costs in its projections, which would have increased the liabilities to $48 million to $53 million.

Former CFO Vidul Prakash, who was named as a defendant and left the company in 2021, was charged with negligence-based fraud, disclosure and books and records violations between December 2020 and May 2021. The company, which did not admit wrongdoing, said that the U.S. Attorney’s Office for the Southern District of New York is also investigating the matter. Prakash did not respond to a request for comment.

Meanwhile, new concerns have emerged. In a recent SEC filing, View admitted that it still had “material weaknesses in our internal control over financial reporting,” as of December 2022. Not only did it lack employees “with an appropriate degree of accounting knowledge and experience” to satisfy reporting requirements, it “did not demonstrate a commitment to integrity and ethical values.” Worse, the company said it believed those weaknesses could result in yet another misstatement, “that would not be prevented or detected.”

In a note to shareholders in May, Mulpuri touted a rosy future for the company claiming that, despite challenges in the commercial real estate industry, View had made “significant” progress. “We are laser focused on building our business to profitability,” he wrote. But the company added this grim hedge: “If the Company is unable to obtain adequate capital resources to fund operations, it would not be able to continue to operate its business.”