The Vision Fund unit of Japan’s SoftBank Group Corp. revealed a quarterly investment loss as a result of falling tech valuations, resulting in an annual net loss of 970 billion yen ($7.18 billion) for the year that ended on March 31.
CEO Masayoshi Son’s efforts to dominate the internet investing industry have been hampered by a string of high-profile failures, including investments made at exorbitant prices with SoftBank’s first Vision Fund and large wagers made with a smaller second fund.
As key architects of that plan left, Son focused on strengthening the balance sheet, lowering his stake in the massive e-commerce company Alibaba Group Holding Ltd., and stepping back from trademark presentations to focus on the offering of chip manufacturer Arm.
The fair value of the portfolio held by the Vision Fund arm decreased by $2.3 billion to $138 billion over the January-March quarter.
WeWork Inc., a provider of coworking spaces, is one of the assets whose value is rising, while Coupang Inc., an online retailer, and AutoStore Holdings Ltd., a maker of robots, are among the assets whose value is declining.
SoftBank decreased the value of the private portfolio companies that the first and second funds owned. The second fund’s portfolio was worth $31 billion at the end of March, but the cost of acquisition was $49.9 billion.
Because the Vision Fund firm only completed 25 new transactions over the course of the previous year, SoftBank claimed that it is in defense mode and has stopped investing.
SoftBank obtained $35.46 billion to boost its cash reserves throughout the fiscal year by issuing prepaid forward contracts with Alibaba shares as collateral. The company raised an additional $4.1 billion through the issuance of forward contracts for the period beginning on April 1, 2023.
How long SoftBank will stick with its holding strategy is the current concern among investors, considering the rise in the cost of various tech equities.
The Vision Fund emphasizes that it has interests in companies that are ready to go public and are valued at about $37 billion, such as Arm and Bytedance, the parent company of the short-form video app TikTok, and other such companies.
Investors are also quite concerned about the prospect of future buybacks. Shares of SoftBank are currently trading at a price that is 0.85% below where they were a year ago, which is a loss of nearly 9%.
Focus on Arm IPO
Investors are now looking to SoftBank-owned British semiconductor company Arm’s IPO as a method to strengthen the Japanese company’s financial sheet and potentially provide it with additional funding for new initiatives. Arm submitted a private application for a listing in the US last month. Arm earlier declared that it would list in the United States rather than the United Kingdom, hurting the London Stock Exchange.
In 2016, SoftBank and Arm reached an agreement.
Arm reported fiscal year revenues of 381.7 billion yen, an increase of more than 27% from the previous year. Pre-tax earnings increased 18% from the prior year to 48.6 billion yen.
