SoftBank suffers historic loss after $27bn blow to Vision Fund
SoftBank’s two Vision Funds posted a historic investment loss of ¥3.5tn ($27bn) for the full year as its biggest holdings were pummelled by rising interest rates and Beijing’s crackdown on the tech sector.
Those losses plunged Masayoshi Son’s conglomerate as a whole into its biggest-ever quarterly net loss of ¥2.1tn. In the lead up to the announcement, shares in the group had tumbled 8 per cent to their lowest level in nearly two months.
The biggest losers for the past quarter included Chinese ride-hailing giant Didi Chuxing, whose shares lost about half their value, and South Korean ecommerce platform Coupang, which fell about 40 per cent.
Other notable poor performers included Singaporean ride-hailing company Grab, US food delivery firm DoorDash and Indian payments group Paytm, which together lost close to $5bn over the quarter, according to Redex Research analyst Kirk Boodry’s estimates.
“The investment environment remains challenging, dominated by fast-rising inflation, increasingly complex geopolitical risk and a global energy shock,” said SoftBank, adding: “Our conviction in the AI revolution remains strong; in the quarter we made 43 new investments.”
As shares in companies held by SoftBank’s Vision Fund plummeted during the global tech rout, the Financial Times reported that Son told executives to slow down investments and expressed alarm over his personal borrowings against SoftBank shares.
Investors said that in addition to the threat of sustained disruptive zero-Covid policies in China, the war in Ukraine and rising interest rates meant the Vision Fund would struggle to list many companies in its portfolio.
SoftBank’s Vision Fund, a $100bn investment vehicle launched in 2017 and backed by Saudi Arabia and Abu Dhabi, was intended to be the first in a string of funds run by SoftBank’s investment arm.
Its image was tarnished after some of its high-profile bets imploded, including on office-sharing group WeWork. For its second Vision Fund, announced in 2019, SoftBank failed to raise outside money.
SoftBank is heavily exposed to the tech sector crackdown in China, with a 25 per cent stake in Alibaba, the ecommerce group owned by Jack Ma that has come under increasing pressure from regulators.
While Alibaba shares recovered towards the end of the quarter after a steep sell-off in mid-March, they are still down about 30 per cent in the year-to-date.
Other tech funds have suffered steep losses, including Tiger Global, which has lost about $17bn this year, marking one of the biggest dollar declines for a hedge fund in history.
“SoftBank’s entire business structure is dependent on one key assumption and that is ever-rising stock prices, more specifically in growth names that are leading the current market sell-off,” said Amir Anvarzadeh of Asymmetric Advisors in a note sent out before the announcement that recommended investors short the stock.
Additional reporting by Kana Inagaki in Tokyo