According to financial reports, SoftBank posted an annual loss of nearly $42 billion on its Vision Fund, one of the largest losses in its history. Although the fund originally began with $45 billion in capital, SoftBank has continued to pour money into it since then, most recently raising $20 billion in September 2018. The massive loss was largely due to the fact that SoftBank has placed many of its holdings into the Vision Fund as investments, rather than liquidating them for cash like most other companies would do.
In its fiscal first quarter, SoftBank reported one of its largest losses at its Vision Fund investment subsidiary as technology stocks continued to decline amid rising interest rates.
The Vision Fund of the major Japanese company reported a 2.93 trillion yen ($21.68 billion) loss for the six-month period.
This resulted in a 3.16 trillion yen net loss for SoftBank for the quarter as opposed to a profit of 761.5 billion yen in the same period previous year. For the corporation, that represents a record quarterly loss.
On Monday, the business also approved a share repurchase programme worth 400 billion yen.
Due to the escalating inflation that has prompted the U.S. Federal Reserve and other central banks to boost interest rates, high-growth equities have suffered, which has negatively impacted SoftBank’s Vision Fund, which was established in 2017 and invests in technology businesses.
After reporting a record 3.5 trillion Japanese yen loss at the investment unit for the previous fiscal year, Masayoshi Son, the outspoken founder of SoftBank and the brains behind the Vision Fund, declared in May that the company would shift into “defence” mode and be more “conservative” with the pace of investments.
Widespread share price declines at SoftBank’s portfolio companies, according to the company, were “primarily triggered by the global downward trend in share prices due to mounting fears over economic contraction fueled by inflation and rising interest rates,” the company claimed.
In the second quarter of the year, shares of businesses including South Korean e-commerce giant Coupang and American delivery service DoorDash took significant hits.
According to SoftBank, the share prices of the private businesses in its portfolio have also decreased.
Son stated, “The globe and the market are in confusion,” on Monday at a presentation. The corporation has “been more selective in making investments,” the CEO continued.
To raise money to support other startups, SoftBank has mainly relied on public listings of its private enterprises. But this year’s stock market downturn has made it challenging for businesses, particularly those in the IT industry, to execute an IPO.
To raise money, the Japanese powerhouse has turned to selling its stock in corporations. SoftBank disclosed on Monday that it had sold its shares in a number of businesses, including online real estate company Opendoor and ride-hailing company Uber. These sales brought in $5.6 billion for SoftBank.
SoftBank also said that it sold Alibaba shares using a derivative known as a forward contract to raise $10.49 billion in the June quarter. Son claimed that SoftBank’s interests in Alibaba constitute a reliable source of funding for the business.
Son claimed that he overreacted when technology stocks were rising last year and that he now feels “embarrassed” about it.
Son claimed that SoftBank “made tremendous swings but couldn’t strike the ball” with the initial Vision Fund.
Despite the fact that he has already learned his lesson, he admitted that his “passion was quite strong against specific companies.”
The organisation “become more systematic” and spent lesser sums every round of investing in businesses with the second Vision Fund, which was established in 2019, in an effort to increase profitability.
Son remarked, “Instead of going for the home run, (we) attempt to go for the first base or second base hit.”
However, Son stated that the staff at the Vision Fund may need to be “dramatically downsized” in light of the issues at SoftBank’s investment division. The CEO stated that “cost reduction” would also need to be implemented across several SoftBank group entities.
But Son keeps losing important allies. Rajeev Misra, who in essence oversaw the Vision Fund, would delegate some of his duties to Vision Fund 2.
Son described Misra as a “important individual” who will continue to aid SoftBank’s investment initiatives.