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SoftBank Vision Fund loses US$7.2b on tech writedowns

Published Fri, Nov 11, 2022 · 03:11 PM

SOFTBANK Group’s core Vision Fund arm posted a US$7.2 billion quarterly loss as plunging startup valuations continue to hammer the company’s financial performance and forces it to slow investments.

SoftBank also plans to write down its entire investment in FTX.com, which would amount to a little less than US$100 million, a person familiar with the investment said. The company has declined to explain its exposure even as the crypto exchange’s co-founder Sam Bankman-Fried says he may file for bankruptcy. 

The Vision Fund segment loss in July-September, followed a 2.33 trillion yen (S$22.7 billion) loss in the June quarter.

Overall, the Japanese conglomerate logged net income of 3.03 trillion yen in the last quarter, buoyed by the disposal of a chunk of its Alibaba Group stake. The company said its total profit on its disposal of Alibaba shares was 5.37 trillion yen.

Billionaire founder Masayoshi Son turned his telecom company into the world’s biggest startup investor, aiming to repeat his early success in backing the Chinese e-commerce pioneer. But the effort has been plagued by missteps and, more recently, a sharp downturn in technology valuations. 

SoftBank has been struggling with declines on public investments, with the Vision Fund recording net valuation losses totalling 1.19 trillion on its public holdings in the quarter just ended.

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Of those, China’s SenseTime Group accounted for 364 billion yen, while US food delivery firm Doordash accounted for 225 billion yen and Indonesian ride-hailing and e-commerce firm GoTo Group 108 billion yen, it said.

“We decided early on that we would strengthen our defences and become more cautious on new investments,” Son said during an earnings results briefing. With interest rates and prices rising, the company will need to play defence “for a while,” he said.

Son said he would no longer helm quarterly results announcements in the near future, and would pass that role on to chief finanancial officer Yoshimitsu Goto. Son will instead focus his time on taking its chip designer unit Arm public, he said.

“Mr Goto is more suitable than me for playing defence,” Son said. “Me, I’m an aggressive person, not a defensive person, and I’d like to concentrate on Arm for the time being.”

Son and SoftBank have been trying to wait out the slump, selling off shares in Alibaba and Uber Technologies to raise cash and shore up its balance sheet. Much of its future investment strategy hinges its ability to make good on its US$32 billion purchase of Arm and take it public next year.

Chipmaker sentiment has soured drastically in recent weeks, putting the onus on Arm’s finances to make any initial public offering successful. 

Arm’s income slid to 5.8 billion yen in the September quarter, down 77 per cent from a year earlier, according to financial details released with SoftBank’s results. Revenue rose slightly in yen terms, but declined about 17 per cent in dollars.

As attention turns to SoftBank’s balance sheet, SoftBank has been hurrying to offload assets to bolster its bottom line and fund a share repurchase spree that has vaulted its share price more than 40 per cent since the start of this quarter. SoftBank’s total interest-bearing debt, excluding telecom arm SoftBank, stood at 13.7 trillion yen, down from more than 17 trillion yen at the end of June.

The accelerated pace of its stock buybacks has sparked renewed speculation that Son may lead a management buyout of SoftBank – something that Son has talked internally about, Bloomberg News has reported.

Beyond Alibaba, SoftBank’s pipeline of asset sales that may fund future buybacks include UK online shopping group THG, UK network provider Pelion Iot, distressed-debt specialist Fortress Investment Group and Indonesian ride-hailing and e-commerce firm GoTo Group, said Bloomberg Intelligence’s Marvin Lo. BLOOMBERG

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