SoftBank's Vision Fund Suffers $2 Billion Loss Despite Tech Stock Rebound: Private Portfolio Down $3.9 Billion, Public Holdings Up $1.9 Billion.

SoftBank's Vision Fund Suffers $2 Billion Loss Despite Tech Stock Rebound: Private Portfolio Down $3.9 Billion, Public Holdings Up $1.9 Billion.

 




SoftBank Group Corp. has reported another loss in its Vision Fund investment unit for the first quarter, despite a rebound in tech stocks. The Japanese conglomerate suffered losses on its unlisted startups in its portfolio, resulting in a loss of ¥297.5 billion ($2 billion) in the three months ended March. This is compared with a ¥2.2 trillion loss a year earlier. The Vision Fund unit lost a record ¥4.3 trillion for the full fiscal year, almost doubling the record loss of ¥2.6 trillion the year before.


This is surprising because technology valuations around the world have largely rebounded this year, with the Nasdaq 100 index, a benchmark for tech stock performance, rallying 20% during the March quarter, lifting share prices for some of SoftBank’s biggest investments. For instance, the South Korean e-commerce company Coupang Inc. gained about 9%, while the Chinese ride-hailing company Didi Global Inc. rose about 20%. SoftBank accounts for such gains in its portfolio companies as profit on its income statement.


However, SoftBank marked down the value of its private companies far more than the increases in its public holdings. It lost about $3.9 billion on its private portfolio during the quarter, while it gained about $1.9 billion with public companies. The company may have marked down the value of private holdings to catch up to the overall market decline from earlier periods. Unlisted names, which account for around 60% of its total investments, had not been marked down more than 20%.


SoftBank’s chief financial officer, Yoshimitsu Goto, led a conference call with investors following the results. Goto acknowledged that the past year had been very rough, and the tech investor was forced to mark down the valuations of almost 350 companies. He suggested that SoftBank may begin to invest more actively again. He said he meets with SoftBank’s founder Masayoshi Son daily and worries about whether Son has enough time to sleep because he is brimming with excitement about artificial intelligence, especially generative AI like ChatGPT.


SoftBank won’t dive into investments right away, but it’s more open to possible deals than it has been in the past. “Last year, unless something unusual happened, we would rather have passed on opportunities,” Goto said. “But this year, if we’re comfortable, after checking every aspect, we want to take steps, one by one.”


Analysts are skeptical about Son jumping back into deal-making mode too quickly. He may need to raise capital through Arm’s IPO before he starts spending money again. Bankers have pitched a valuation of between $30 billion to $70 billion for Arm’s listing, reflecting the challenges of valuing the firm against a backdrop of volatile semiconductor equity prices.


SoftBank offloaded an additional $7.3 billion in Alibaba shares this year through prepaid forward contracts. This may have reduced SoftBank’s Alibaba stock to around 3.8%. Goto said SoftBank still has the option to buy back the shares or close out the options.


Last month, SoftBank said it is selling its early-stage venture capital arm SoftBank Ventures Asia Corp. to an entity led by Taizo Son, the younger brother of Masayoshi Son. Terms of the deal weren’t 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 maximize SoftBank’s divestment income. SoftBank is also nearing a deal to sell Fortress Investment Group to Mubadala for as much as $3 billion.