SoftBank's Vision Fund loses US$5b as tech slump persists

SoftBank's Vision Fund loses US$5b as tech slump persists
-A +A

(Feb 7): SoftBank Group Corp’s startup investment unit reported another quarterly loss, hurt by sluggish valuations throughout the technology landscape.

A collapse in valuations last year has pummelled the global tech investor, which holds stakes in hundreds of startups. Writedowns in closely held companies outweighed a modest recovery in SoftBank’s listed investments, such as Didi Global Inc and Grab Holdings Ltd. But as much as valuations have already fallen, investors remain concerned that there may be further cuts yet ahead.

The Vision Fund segment lost ¥660 billion (US$5 billion) in the three months ended in December for its fourth straight quarter in the red, according to a release on Tuesday. SoftBank Group as a whole logged a net loss of ¥783.4 billion, missing the analyst estimate for a profit of ¥205.9 billion.

“Weakness in global equity markets remains the main risk to the SoftBank story,” Kirk Boodry, an analyst at Redex Research who publishes on SmartKarma, wrote in a note ahead of the earnings release. Weakness in the tech markets could continue to hurt the company if it forces a meaningful delay in the planned initial public offering (IPO) of SoftBank’s chip design unit Arm Ltd, he said.

The bulk of SoftBank’s investments is tied to an opaque segment of the investment world, where valuations of closely held companies are dictated by a small group of investors. Lack of visibility on how SoftBank values these investments — which number in the hundreds — continues to create uncertainty with shareholders.

SoftBank’s billionaire founder Masayoshi Son turned his telecom company into the world’s biggest startup investor, aimed at replicating his early success in backing Chinese e-commerce giant Alibaba Group Holding Ltd, but on a bigger scale by deploying billions instead of millions. The effort has been crippled by missteps, most recently by a prolonged slump in tech prices, exacerbated by US-China tensions.

Losses at the Vision Fund deplete capital needed for the kind of big bets SoftBank used to make. Once the world’s most aggressive tech investor, SoftBank’s investment machine has now come to an almost complete stop. In the last quarter, it put less than US$350 million in just a handful of startups, a pale shadow of the venture capital giant that invested more than US$144 billion in five-and-a-half years.

Many of its portfolio companies are now cutting jobs or downsizing businesses to weather a global downturn in consumer demand, even as markets’ appetite for big initial public offerings is waning.

One of the keys to reigniting investment activity at SoftBank lies in a successful Arm IPO, and the company’s billionaire founder Masayoshi Son has said he would focus on that task, stepping away from earnings calls. SoftBank now plans to list the firm by December.