Japan's SoftBank Group reported a record $26.2 billion loss at its Vision Fund investment arm on Thursday, as rising interest rates and political instability affected high-growth tech stocks.
The loss was in stark contrast to a year earlier when SoftBank delivered a record annual profit, putting founder and chief executive Masayoshi Son's strategy of concentrating heavily on riskier, high-growth stocks under more scrutiny.
Investors are now increasingly questioning whether many of the former high-flyers it has invested in have a clear path to profitability. South Korean e-commerce company Coupang is trading 70 per cent below its listing price. Ride-hailing companies Didi Global and Grab also tumbled during the January to March quarter.
"When the world is in disorder, SoftBank should play defence," Mr Son said at a subdued briefing after the earnings announcement, pledging to bolster the group's cash position through asset monetisation and tighten investment criteria.
His earnings presentations are closely watched for clues into his thinking about the future of the sprawling tech conglomerate. On Thursday, he repeatedly emphasised the group's financial prudence and the prospects for chip designer Arm, which SoftBank hopes to list in the US.
Vision Fund has 475 companies in its portfolio and made 43 investments during the fourth quarter. It is slowing the pace of investment as private prices lag behind the fall in public markets.
While 20 portfolio companies raised funds at higher valuations during the quarter, SoftBank also marked down some of its unlisted assets, in sectors such as consumer, FinTech and transport, contributing to the record loss.
SoftBank was likely to invest half or even a quarter as much as last year, Mr Son said, as part of a pledge to keep the group's loan-to-value ratio, which was 20.4 per cent at the end of March, below 25 per cent.
Mr Son, 64, has described SoftBank as a goose laying golden eggs but the pace of listings has slowed with one notable recent exception, Indonesia's GoTo, sliding since going public last month.
SoftBank's own shares fell 8 per cent ahead of earnings to ¥4,491 ($35) and are down more than half from highs in March last year. The group is 40 per cent through a ¥1 trillion buyback programme launched in November.
The group's annual net loss was ¥1.7tn. The Vision Fund unit's assets, including the Latin American funds, were worth $175.6bn at the end of March. That compared to an acquisition cost of $141.6bn.
SoftBank also recorded, in its non-consolidated earnings, a ¥669.5bn loss due to its SB Northstar trading arm, which invested in listed stocks and derivatives but brought personal losses for Mr Son.
The unit's activity was part of a push to diversify SoftBank's portfolio beyond e-commerce company Alibaba, whose shares have fallen by more than two thirds as regulatory action roils China tech companies.
"There are wonderful companies in China and we will invest in them but with smaller deals," said Mr Son.
But the billionaire repeated his belief in the "information revolution", with a graph showing the current market downturn as a blip before internet companies resumed their upward climb.
"In a year or two I think the stock market will recover and then the timing to go on the offensive will return," Mr Son said.
