SoftBank Vision Fund loses $7.2 billion on back of tech writedowns

The Vision Fund segment lost 1.02 trillion yen in July-September, following a 2.33 trillion yen loss in the June quarter. Overall, the Japanese conglomerate logged net income of 3.03 trn in last qtr

SoftBank Group Corp.’s core Vision Fund arm posted a $7.2 billion quarterly loss as plunging startup valuations continue to hammer the company’s financial performance and forces it slow investments.
 

The Vision Fund segment lost 1.02 trillion yen in July-September, following a 2.33 trillion yen loss in the June quarter. Overall, the Japanese conglomerate logged net income of 3.03 trillion yen in the last quarter, buoyed by the disposal of a chunk of its Alibaba Group Holding Ltd. stake. The company said its total profit on its disposal of Alibaba shares was 5.37 trillion yen.

Billionaire founder Masayoshi Son turned his telecom company into the world’s biggest startup investor, aiming to repeat his early success in backing the Chinese e-commerce pioneer. But the effort has been plagued by missteps and, more recently, a sharp downturn in technology valuations. 

SoftBank has been struggling with declines on public investments, with the Vision Fund recording net valuation losses totaling 1.19 trillion on its public holdings in the quarter just ended. Of those, China’s SenseTime Group Inc. accounted for 364 billion yen, while US food delivery firm Doordash Inc. accounted for 225 billion yen and Indonesian ride-hailing and e-commerce firm GoTo Group 108 billion yen, it said.

“We decided early on that we would strengthen our defenses and become more cautious on new investments,” Son said during an earnings results briefing. With interest rates and prices rising, the company will need to play defense “for a while,” he said.

Son said he would no longer helm quarterly results announcements in the near future, and would pass that role on to Chief Finanancial Officer Yoshimitsu Goto. Son will instead focus his time on taking its chip designer unit Arm Ltd. public, he said.

“Mr. Goto is more suitable than me for playing defense,” Son said. “Me, I’m an aggressive person, not a defensive person, and I’d like to concentrate on Arm for the time being.”

Other investment losses loom. SoftBank plans to write down its entire investment in FTX.com, which would amount to a little less than $100 million, a person familiar with the investment said. The company has declined to explain its exposure even as the crypto exchange’s co-founder Sam Bankman-Fried says he may file for bankruptcy. 

“I don’t think anyone can conclusively say that markets have bottomed,” said Kirk Boodry, an analyst at Redex Research.

Son and SoftBank have been trying to wait out the slump, selling off shares in Alibaba and Uber Technologies Inc. to raise cash and shore up its balance sheet. Much of its future investment strategy hinges its ability to make good on its $32 billion purchase of Arm and take it public next year.

Chipmaker sentiment has soured drastically in recent weeks, putting the onus on Arm’s finances to make any initial public offering successful. 

Arm’s income slid to 5.8 billion yen in the September quarter, down 77% from a year earlier, according to financial details released with SoftBank’s results. Revenue rose slightly in yen terms, but declined about 17% in dollars.

As attention turns to SoftBank’s balance sheet, SoftBank has been hurrying to offload assets to bolster its bottom line and fund a share repurchase spree that has vaulted its share price more than 40% since the start of this quarter. SoftBank’s total interest-bearing debt, excluding telecom arm SoftBank Corp., stood at 13.7 trillion yen, down from more than 17 trillion yen at the end of June.

 

The accelerated pace of its stock buybacks has sparked renewed speculation that Son may lead a management buyout of SoftBank -- something that Son has talked internally about, Bloomberg News has reported.

Beyond Alibaba, SoftBank’s pipeline of asset sales that may fund future buybacks include UK online shopping group THG Plc, UK network provider Pelion Iot Ltd., distressed-debt specialist Fortress Investment Group and Indonesian ride-hailing and e-commerce firm GoTo Group, said Bloomberg Intelligence’s Marvin Lo.