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SoftBank reports record $32.3 billion loss on global tech sell-off

TOKYO (BLOOMBERG) – SoftBank Group reported a record 3.16 trillion yen ($32.3 billion) net loss as a sell-off in global tech stocks continued to hammer its Vision Fund’s portfolio of investments.

The Vision Fund segment posted a loss of 2.33 trillion yen in the three months ended June 30, following a then record 2.2 trillion yen loss in the previous quarter. SoftBank also reported a 820 billion yen foreign exchange loss because of the weaker yen.

Global stock prices continued their slide during the 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 is the most serious setback for founder Masayoshi Son since he repositioned his company to focus on tech investments.

“The loss is the biggest in our corporate history and we take it very seriously,” Mr Son said during a press conference on Monday (Aug 8) after the results. 

Asked about what lessons he has learnt from the experience, he said: “There are too many to count.”

The world’s largest tech fund holds large stakes in hundreds of unlisted tech 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 293.4 billion yen for Coupang, 235.9 billion yen for SenseTime Group and 220.7 billion yen for DoorDash. It also mentioned drops at AutoStore Holdings and WeWork.

Mr Son said the Vision Fund will have to scale back after the losses. Mr 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. 

“For SoftBank Vision Fund, we know we have to reduce operational costs substantially,” Mr Son said. “Our vision remains the same; our beliefs remain the same. But we know we have to reduce operational costs, including headcount. For new investments, we have to be more selective.”

SoftBank said the fair value among its still-private companies 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, Bloomberg News has reported.

“Valuations will probably get worse before they get better,” said Redex Research analyst Kirk Boodry, who publishes on Smartkarma. 

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 US$32 billion (S$44 billion) purchase of chip designer unit Arm through an initial public offering. Mr Son 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 buy-back programmes. Most recently, it announced a one trillion yen buy-back programme until September. That, as well as expectations that the company may launch another buy-back programme later this year, has helped its shares gain about 5 per cent this year.

Mr Son has been taking defensive measures. He raised US$10.5 billion by entering forward contracts related to Alibaba Group Holding and also procured US$6.8 billion by entering forward contracts on and after July 1.