SoftBank Group lost money in its Vision Fund investment unit again despite a rebound in tech stocks, as the Japanese conglomerate suffered losses on private startups in its portfolio.

The Vision Fund unit lost 297.5 billion yen (S$2.9 billion) in the three months ended March, compared with a 2.2 trillion yen loss a year earlier. For the full year, founder Masayoshi Son’s Saudi and Abu Dhabi-backed fund remained underwater with a record 4.3 trillion yen loss.

The Nasdaq 100 index, a benchmark for tech stock performance, rallied 20 per cent during the March quarter, lifting share prices for some of SoftBank’s biggest investments. Coupang gained around 9 per cent and Didi Global about 20 per cent, during the period. But most of the Vision Fund portfolio firms are still reeling from the brunt of last year’s stock market collapse. 

But many of the privately-held companies that SoftBank has invested in are not yet profitable, while the initial public offering (IPO) market remains lacklustre. “I remain cautious about the rest of the year, and private companies could continue to drag down valuations,” said Victor Galliano, an independent analyst who publishes on Smartkarma. 

SoftBank’s startup investments came to a screeching halt, with Vision Fund investments falling more than 90 per cent to just US$3.14 billion for the full year to March.

The billionaire Son has said the company will remain in defence mode until financial markets recover. SoftBank is in the process of divesting a number of its assets to clean up its balance sheet and appease worried investors, while promoting the highly-anticipated IPO of Arm. 

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Bankers have pitched a valuation of between US$30 billion to US$70 billion for Arm’s listing, a wide range reflecting the challenges of valuing the firm against a backdrop of volatile semiconductor equity prices.

“The Arm story is key and valuation is important, but that may be more at the mercy of markets than SoftBank would like,” said Mio Kato, an analyst from LightStream Research who publishes on Smartkarma. 

SoftBank offloaded an additional US$7.3 billion in Alibaba shares this year through prepaid forward contracts, according to a Bloomberg analysis of regulatory filings. This may have reduced SoftBank’s Alibaba stock to around 3.8 per cent. Last month, the Japanese conglomerate said it is selling its early-stage venture capital arm SoftBank Ventures Asia to an entity led by Taizo Son, the younger brother of Son. Terms of the deal were not disclosed. 

The sale of the startup incubator could ease SoftBank’s financing burden, while offloading Alibaba shares in the wake of the e-commerce leader’s plans to split into six parts would help maximise SoftBank’s divestment income, Bloomberg Intelligence analyst Marvin Lo wrote in a note last month. 

SoftBank is nearing a deal to sell Fortress Investment Group to Mubadala for as much as US$3 billion, the Financial Times reported, citing unidentified people briefed on the matter.

That would help SoftBank’s share price, Galliano said. “The focus for now has to be realising investments where possible and reducing leverage, and we look forward to perhaps more disclosure on Masayoshi Son’s debts with the group.”

Investors are not yet declaring the bottom for the venture capital sector, given the recent collapses of Silicon Valley Bank and First Republic Bank, which provided funding support to the startup ecosystem.

“Markets remain volatile and the near-term outlook for Vision Fund remains murky,” said Kirk Boodry, an analyst with Astris Advisory. BLOOMBERG