SoftBank Suffers $18 Billion Loss
Japan’s SoftBank Group Corp reported an $18 billion loss at its giant Vision Fund. This is pushing Masayoshi Son’s conglomerate to a record loss. It highlights the deepening crisis at its portfolio companies due to the global downturn.
The 1.9 trillion yen operating shortfalls at the Vision Fund left SoftBank with its worst annual loss. This was a loss of 1.4 trillion yen. This includes losses of almost $10 billion at the office-sharing firm, WeWork, and the ride-hailing app, Uber Technologies Inc.
In stock trading, Son has been pressured by U.S. hedge fund, Elliott Management, to make share buybacks and bolster governance. He said the bank would raise 1.25 trillion yen against its stake in China’s Alibaba Group.
In an earnings presentation, Son said coronavirus is an unprecedented crisis, comparing it to the Great Depression.
Appearing more subdued than usual, he said some of his tech unicorns had fallen “into the valley of the coronavirus”.
He further said he believes some of them will fly over the valley. Beside a slide depicting cartoon unicorns dropping into a hole as a lone winged unicorn escaped to the other side.
The crisis has suberged Vision Fund’s portfolio underwater. It has a $75 billion investment in 88 startups worth $69.6 billion by the end of March.
Before being upended by the outbreak, the $100 billion worth of funds had already delivered two consecutive quarters of losses.
SoftBank booked a $7.5 billion loss on other tech investments, which it attributed primarily to the economic shock. The outbreak has aggravated underlying problems, as many of its bets are on unproven startups, which affected stocks.
Softbank Provides Limited Details
The company is loosening ties with Alibaba Group, the largest asset in its portfolio. The Chinese e-commerce major’s co-founder, Jack Ma, is departing from the SoftBank board.
The bank provided scant detail on which companies saw writedowns but offered a sector breakdown. It is showing investments in construction and real estate were worth less than half of the cost price. Flagship transportation investments are also underwater.
The company has leveraged its investments to supply further funding for other bets. This is a strategy that has come under strain as valuations tumble. Losses are larger than the group’s revised estimate from just last month.
SoftBank-backed satellite operator, OneWeb, filed for bankruptcy in late March, adding to an impairment loss. This is in relation to investments held outside Vision Fund, which also includes part of the stake in WeWork.
They said that uncertainty in its investment business and in the stock market will remain over the next fiscal year. This will be likely if the pandemic continues.
