In response to tech write-downs, SoftBank Vision Fund lost $7.2 billion
- ByStartupStory | November 21, 2022
SoftBank Group Corp.’s flagship Vision Fund division posted a $7.2 billion quarterly loss as startup valuations keep falling and force the business to reduce investments.
The Vision Fund segment lost 1.02 trillion yen from July through September after suffering a 2.33 trillion yen loss in the June quarter. The Japanese conglomerate made 3.03 trillion yen in net profits in the most recent quarter thanks to the selling of a portion of its stake in Alibaba Group Holding Ltd. The company claims that the sale of Alibaba’s shares resulted in a 5.37 trillion yen profit overall.
Masayoshi Son, the billionaire entrepreneur, transformed his telecom business into the largest startup investor in the world in an effort to build on his early success in supporting the Chinese e-commerce pioneer. But errors and, more lately, a significant decline in technology valuations have dogged the attempt. SoftBank has been experiencing losses on its public investments; in the most recent quarter, the Vision Fund recorded net valuation losses on its public holdings totalling $1.19 trillion. China’s SenseTime Group Inc. accounted for 364 billion yen of those, followed by the US food delivery company Doordash Inc. with 225 billion yen and Indonesia’s GoTo Group with 108 billion yen, it said.
Son said during an earnings results event, “We decided early on that we would reinforce our defences and become more cautious on new investments. The corporation will need to play defence “for a long,” he said, as interest rates and prices rise. Son announced that starting soon, he will hand over control of quarterly results announcements to Chief Financial Officer Yoshimitsu Goto. Son said he will instead concentrate on making its Arm Ltd. chip designer unit public. Son declared, “Mr Goto is more qualified than I am to play defence.” Me, I’m an aggressive person, not a defensive person, and for the time being, I’d like to focus on Arm. More investment losses are imminent. According to a person with knowledge of the investment, SoftBank intends to write down the whole amount of its investment in FTX.com, or a little under $100 million. Even though Sam Bankman-Fried, the co-founder of the cryptocurrency exchange, has indicated he may declare bankruptcy, the company has neglected to explain its exposure. Kirk Boodry, an analyst at Redex Research, said: “I don’t think anyone can state with absolute certainty that markets have bottomed. To raise cash and strengthen its balance sheet, Son and SoftBank have been trying to ride out the downturn by selling off shares of Alibaba and Uber Technologies Inc. To a large extent, its future investment strategy depends on its capacity to follow through on its $32 billion acquisition of Arm and eventually float it. The recent sharp decline in chipmaker sentiment places the burden of a successful initial public offering on Arm’s financial position.
According to financial information provided along with SoftBank’s results, Arm’s profits dropped to 5.8 billion yen in the September quarter, down 77% from a year earlier. In yen terms, revenue increased marginally but fell by nearly 17% in dollars.
SoftBank has been rushing to unload assets to boost its bottom line and fund a share repurchase splurge that has rocketed its share price by more than 40% since the beginning of this quarter as attention shifts to SoftBank’s financial sheet. Without including its telecom subsidiary, SoftBank Corp., SoftBank’s overall interest-bearing debt decreased from more than 17 trillion yen at the end of June to 13.7 trillion yen. Son has reportedly discussed internally leading a management buyout of SoftBank, and the company’s accelerated pace of stock buybacks has reignited this rumour. Beyond Alibaba, SoftBank’s pipeline of asset sales that might finance future buybacks also includes Indonesian ride-hailing and e-commerce company GoTo Group, UK network provider Pelion IoT Ltd., an expert in distressed debt Fortress Investment Group, and UK online retailer THG Plc.
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