SoftBank lost nearly 6 billion dollars because… any investment ‘failed’

A year after the “crisis” of the technology sector took place, SoftBank is still being affected when market sentiment is unstable. The company recently reported a $5.8 billion loss for Vision Fund in the fourth quarter of 2022. Meanwhile, SoftBank’s total loss was $5.9 billion.

The Vision Fund had about $300 million in new investments, down 98% from $15.6 billion in the middle three months of 2021. Back then, SoftBank and CEO Masayoshi Son were still famous for splashing money on the market. risky startups.

The move to “quit” almost completely is part of what Son once considered “defensive”, in which SoftBank is keeping cash from better-performing divisions such as its telecom business, rather than investing in it. invest in startups.

SoftBank’s CFO, Yoshimitsu Goto, said it’s simply not the right time to invest in startups. He said that SoftBank could become belligerent at any time, and warned against “wasting money” at a bad market time.

The newly released numbers show that SoftBank is doing poorly. The company spent more than $140 billion from the Vision Fund between 2017 and last year. This amount is even more than the funding of the largest venture capital firms in Silicon Valley. The fund pours money into companies like Uber Technologies, DoorDash and WeWork. At its peak, the Vision Fund made $66.4 billion on paper. And recently, the fund’s accumulated loss fell to $6.7 billion.

The losses in the most recent quarter were largely due to the misreporting of the private equity market, causing investment managers to incur losses from startups for a longer period of time than from listed startups. While SoftBank suffers losses on listed stocks, such as WeWork and Compass, private investments are harder to value on a daily or monthly basis and often rely heavily on raising new capital or failing to meet targets. internal spending.

According to SoftBank, privately owned startups that the two Vision Funds invest in recorded a decline in value of more than $5 billion last quarter, although shares of listed companies rebounded.

Analysts and some short-sellers say SoftBank’s losses to private startups could be even lower, given the disparity between the group’s losses and the listed group’s.

For example, the listed shares held by the Vision Fund have fallen 37% from their initial investment, which translates to a loss of $11.5 billion. SoftBank, meanwhile, said its stakes in privately held companies that aren’t particularly profitable are only about 4.6 percent, or $1.6 billion. Those private investments include Oyo, ByteDance and delivery firm GoPuff.

In addition, SoftBank had another loss with its investment in WeWork, which reduced the value of loans it made with the company by $1.8 billion. Previously, SoftBank had “pumped” more than $ 10 billion and considered WeWork a technology startup. After that, the Japanese billionaire’s company provided additional billions of dollars in debt to support WeWork’s restructuring. However, after listing in 2021, WeWork’s shares continuously plummeted, the market capitalization is currently about 1.5 billion USD.

Another problem SoftBank faces is cryptocurrencies. The company says it has made 26 investments in the crypto space worth $1 billion, a relatively small portion of its cash. SoftBank revealed it lost about $97 million on its investment in FTX.

Meanwhile, the rally in tech stocks this year has been a driving force for SoftBank. Navneet Govil, CFO of Vision Fund, said about 30 companies in the fund’s portfolio are ready to go public when market conditions improve, which could help SoftBank improve profits. However, the company remains cautious with its outlook.

SoftBank’s profits have fluctuated wildly in recent quarters. After posting a record loss of more than $20 billion in the second quarter of 2022, the company recorded an equally large profit in the third quarter thanks to profits from the sale of Alibaba shares.

The event to announce business results for the fourth quarter of 2022 marked the first time that billionaire Masayoshi Son did not attend in many years. Late last year, the CEO said he decided to temporarily stop speaking at these events because he wanted to focus on chip design firm Arm.

Goto said SoftBank continues to plan to list Arm in March 2024 and has made progress.

Refer to WSJ