SoftBank Group reported a record ¥3.16 trillion ($23.4 billion) net loss as a selloff in global technology stocks continued to hammer its Vision Fund’s portfolio of investments.
The Vision Fund segment of the business posted a loss of ¥2.33tn in the three months to the end of June, following a then-record ¥2.2tn loss in the previous quarter. SoftBank also reported a ¥820bn foreign exchange loss because of the weaker yen.
Global stock prices continued to slide during the April-June quarter, hurting valuations of SoftBank’s key public holdings like Uber Technologies and Coupang. The Nasdaq 100, a barometer for technology heavyweights, lost 22 per cent during the period, capping its worst such performance since the global financial crisis in 2008.
It’s the most serious setback for founder Masayoshi Son since he repositioned his company to focus on tech investments.
“Valuations will probably get worse before they get better,” said Redex Research’s Kirk Boodry, who publishes on Smartkarma.
The world’s largest technology fund holds large stakes in hundreds of unlisted technology start-ups. But low tech valuations have been draining SoftBank’s ability to turn public listings of its portfolio companies into liquidity to fuel further big bets.
SoftBank said the Vision Fund losses included ¥293.4bn for Coupang, ¥235.9bn for SenseTime Group and ¥220.7bn for DoorDash. It also mentioned drops at AutoStore and WeWork.
SoftBank said that among its still-private companies, fair value dropped in “a wide range” because of weak performance, recent funding rounds and declines in the value of comparable public companies.
Shares of ByteDance, the Chinese parent of TikTok, have slumped more than 25 per cent since last year in private markets, while Swedish buy-now-pay-later company Klarna Bank had its valuation slashed 85 per cent in a recent funding round compared with June 2021.
SoftBank and Mr Son are now trying to wait out a slump in chip-related stocks so that it can grab a return on its $32bn purchase of chip designer unit Arm through an initial public offering. The Japanese billionaire has said he aims to make the offering the biggest-ever for a chip company.
Shares in SoftBank itself are close to where they were five years ago, before the launch of the Vision Fund, despite a series of aggressive buyback programmes.
Most recently, it announced a ¥1tn buyback programme through September. That, as well as expectations that the company may launch another buyback program later this year, have helped its shares gain about 5 per cent this year.
Mr Son has been taking defensive measures. He raised $10.5bn by entering forward contracts related to Alibaba Group and also procured $6.8bn by entering forward contracts on and after July 1.
SoftBank said such measures had resulted in a large improvement in its loan-to-value ratio, a key metric Mr Son tracks.
The company also exited its holding in Uber.
SoftBank is also grappling with the departure of a growing number of top executives at the Japanese conglomerate, putting more responsibility on the founder Mr Son’s shoulders just as the outlook turns increasingly grim.
The company’s former chief operating officer Marcelo Claure left earlier this year, while former chief strategy officer Katsunori Sago resigned in 2021. Rajeev Misra, the long-time head of the Vision Fund, is stepping away from most of his responsibilities and will start his own investment fund.