September 30, 2023

softbank posted record losses for its Vision Fund as the recent rally in tech stocks did little to help another difficult year for its flagship investment unit.

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The Japanese giant’s vision fund segment reported a loss of 4.3 trillion Japanese yen ($32 billion) for its fiscal year ending March 31, compared with a loss of 2.55 trillion yen in the same period a year earlier.

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SoftBank reported total losses on investments in the Vision Fund of 5.28 trillion Japanese yen versus 3.43 trillion yen a year ago. Despite the rally in tech stocks this year, they are roughly lower than they were a year ago. tech-heavy Nasdaq 100 The index declined about 11% during SoftBank’s fiscal year.

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Overall, SoftBank posted a net loss of 970.14 billion yen for the fiscal year, down from a 1.7 trillion loss in the same period a year earlier.

Despite gains from exiting investments in high-profile companies such as ride-hailing firm Uber, SoftBank said it posted losses in sectors including Chinese artificial intelligence firm Sensetime and Indonesian ride-hailing and e-commerce company GoTo’s share prices. Did.

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Over the past year, SoftBank has been exiting some of its highest-profile investments to raise cash. It reduced its overall losses through the sale of shares in T-Mobile and Alibaba. After Son made his fortune with an initial investment in Alibaba two decades ago, the latter continued to offload some of his shares in the company through derivatives called forward contracts.

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In August, it said it had sold its remaining stake in US ride-hailing giant Uber.

The companies SoftBank has invested in are well capitalized, according to Yoshimitsu Goto, chief financial officer of the Japanese giant. He said SoftBank has several companies ready to go public, which are valued at a combined $37 billion. He did not name these companies.

The brainchild of founder Masayoshi Son, SoftBank’s Vision Fund comprises Vision Fund 1 and Vision Fund 2 and invests in high-growth stocks that have weathered headwinds from rising interest rates globally, allowing investors to Have had to sell out of risky equities like tech.

Amid mounting losses, Son’s key aide and top SoftBank executive Rajeev Mishra stepped down from some of his roles in the company. Mishra was instrumental in the early days of the Vision Fund, which was launched in 2017.

‘defense’ mode

About a year ago, Son said SoftBank would go into “defense” mode in the face of adversity and become more disciplined with its investments.

That strategy appeared to be working in SoftBank’s fiscal fourth quarter from January to March, helped by a rally in tech stocks. SoftBank’s Vision Funds reported an investment loss of 236.8 billion yen in the period, compared with 730.3 billion yen in the prior quarter.

SoftBank said it made $3.14 billion in new or follow-on investments in its fiscal year, down from $44.26 billion in the same period a year earlier.

During a press conference on Thursday, Goto cited the collapse of Silicon Valley Bank and issues at Credit Suisse, saying it has been a “volatile” year marked by geopolitical risks and instability of the financial system.

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“In the first quarter, we may see some signs of improvement, although we are not expecting a fundamental resolution to those issues,” Goto said.

Yet he added that artificial intelligence technology is making “dramatic progress” with the company considering whether to stay in defense mode.

“With those positions should we stick to defense only or should we balance that with offense?” Goto asked.

Arm IPO in focus

Now investors are looking to the initial public offering of British semiconductor firm Arm, which is owned by SoftBank, as a way to shore up the Japanese firm’s balance sheet and perhaps give it more money to make new investments. Last month, Arm secretly filed for listing in the US Arm had previously said it would list in the US above the UK, shocking the London Stock Exchange.

SoftBank agreed to acquire Arm in 2016. Goto said he was unable to discuss Arm in detail due to confidential filings in the US, but said preparations for the IPO “are going smoothly.”

The branch reported sales of 381.7 billion yen in the fiscal year, up more than 27% year-on-year. The company’s pre-tax income rose 18% year-on-year to 48.6 billion yen.