Softbank’s Vision Fund reports record loss on Son betting failure

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Softbank's Vision Fund reports record loss on Son betting failure

Bloomberg — SoftBank Group Corp. (9984) posted a record annual loss at its Vision Fund unit, after a global sell-off in tech stocks hit the value of holdings in publicly traded companies such as Coupang Inc. (CPNG) and Didi Global. Inc. (DIDI).

The Vision Fund unit posted a loss of 2.64 trillion yen ($20.5 billion) in the year ending March 31, compared with a record profit of 4.03 trillion yen (JPY) a year earlier. It was the biggest annual loss since founder Masayoshi Son repositioned his firm into an investment holding company with the launch of the Vision Fund in 2017.

The world’s largest tech fund has had to deal with losses from the pandemic and a global stock market slump that has pushed once-big tech companies down. The Vision Fund’s portfolio dragged the Japanese company’s annual net loss to $1.71 trillion yen, from $5 trillion in profit a year ago.

SoftBank shares are down 17% so far this year, including an 8% drop on Thursday. The Nasdaq 100 index, heavily weighted by tech stocks, plunged 27% and entered a bear market in March on concerns of runaway inflation, rising interest rates and possible slowing growth. economic of the United States.

Son, in a press conference after the release of his results, repeatedly stressed that he knows how to get through difficult times. He said that SoftBank he has a lot of cash to meet its debt obligations and that the company’s foundations are solid.

“In terms of personality, I like to play attack,” Son said. But with the “pandemonium” of Covid-19 and the war in Ukraine, he understands that it is a time for caution. “Now is the time for SoftBank to be on the defensive.”

Son is taking a personal hit of some $2.4 billion for his decision to go public. SoftBank created a controversial side company in 2020 called SB Northstar, whose goal was to use the company’s excess cash to earn some money by picking stocks. Son took a personal 33% stake in the unit, while the company owned the rest of the capital.

With tech stocks plummeting last quarter, Northstar took a hit. SoftBank said it would recognize a loss of 670 billion yen in the latest fiscal year, while Son takes care of 315 billion yen.

The fall in global equities is also affecting SoftBank’s stock selection basket, which is full of tech names that have traded at high multiples backed by easy money. Successful IPOs by companies such as South Korean e-commerce giant Coupang, Chinese trucking pioneer Didi and Chinese online real estate platform KE Holdings Inc. (BEKE) have gone from being the main driver of earnings growth to become the biggest drag. Coupang shares fell 40% in the first quarter, Didi 50% and KE Holdings 39%.

“All investments in the portfolio continue to go down,” Kirk Boodry, an analyst at Redex Research, said before the results were released. “There’s a lot more unease and worry about where the stock might end up.”

Even Alibaba Group Holding Ltd. (BABA), the Chinese e-commerce giant that became one of the most successful ventures of all time, has lost its shine. The scandals and missteps of WeWork Inc (WE), Wirecard AG and Greensill Capital have drawn international scrutiny.

“People thought Son could make good investment decisions,” says Mio Kato, an analyst at LightStream Research who publishes on SmartKarma. “There is now less evidence that SoftBank management’s investment decisions are good.” Wirecard and WeWork are some of the examples. When the environment changes, they stop being effective.”

This article was translated by Estefanía Salinas Concha

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