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SoftBank faces record loss amid plunging tech valuations and big bets on the likes of Didi Global

  • The world’s largest tech fund is estimated to have lost about US$18.6 billion on its public portfolio in the quarter ended March
  • Lower tech valuations have dented SoftBank CEO Masayoshi Son’s reputation and raised concerns over the Vision Fund’s sustainability

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The logo of SoftBank Group Corp is displayed at the SoftBank World 2017 conference in Tokyo on July 20, 2017. Photo: Reuters
Bloomberg
Billionaire Masayoshi Son is poised to set another record – and not the good kind – when he reports earnings for the March quarter on Thursday, as SoftBank Group Corp’s Vision Fund investment unit may have lost more money in one quarter than it ever has before.
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The world’s largest tech fund is estimated to have lost about US$18.6 billion on its public portfolio alone during the quarter ended March 31, even greater than the record US$18.3 billion drop marked in the fiscal second quarter, according to Kirk Boodry, an analyst at Redex Research who publishes on SmartKarma. That would mean a loss for the Vision Fund unit of about US$10 billion, accounting for SoftBank’s stake in each fund, Boodry estimates.

It is a drastic reversal from a year ago when Son took the stage in Tokyo to announce SoftBank had earned more money in a single quarter than any Japanese company in history. The company he founded about 40 years earlier hit net profit of 1.93 trillion yen (US$17.7 billion at the time), eclipsing Japan Inc heavyweights such as Toyota Motor Corp and NTT Corp.

“It’s not normal. Investors, markets are starting to get worried,” Boodry said. When it comes to “the scale or potential of losses, markets seem to be building in more downside in general”.

SoftBank’s two Vision Funds have been hit hard by plunging tech valuations as global interest rates climb and China tightens its regulatory grip on the industry. South Korea’s Coupang and China’s Didi Global have been among the biggest drags for the Vision Fund, with each posting their biggest quarterly share-price slump of 40 per cent and 50 per cent, respectively.

The Vision Fund’s biggest loss to date – 825.1 billion yen – came in the fiscal second quarter when global stock markets tumbled. The unit then regained profitability, earning 109 billion yen in the three months ended December 31.

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The actual bottom line for the fiscal fourth quarter will hinge on how SoftBank marks the value of its vast number of privately-held holdings. These include ByteDance, which operates the popular short video platform TikTok, and India’s Oyo Hotels.

“There is much less visibility on this part of the portfolio, particularly at Vision Fund 2 where many of these investments are smaller or at an earlier stage,” Boodry wrote in a note to investors. Still, “SoftBank will likely take meaningful losses in the private portfolio too.”

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