SoftBank founder Masayoshi Son said his conglomerate was taking a “defensive” position and slowing down investments after its Vision Fund posted a historic investment loss of ¥3.5tn ($27bn) for the full year.
Those falls plunged Son’s conglomerate as a whole into its biggest-ever quarterly net loss of ¥2.1tn. Shares in the group closed down 8 per cent on Thursday ahead of the results, tumbling to their lowest level in nearly two months.
SoftBank’s holdings were pummelled by rising interest rates and Beijing’s crackdown on the tech sector. The biggest losers for the past quarter included ride-hailing group Didi Chuxing, whose shares have lost about half their value, and South Korean ecommerce platform Coupang, which fell about 40 per cent.
Son worked to reassure investors that the tech conglomerate’s debt load was manageable and that he was embracing a different strategy to adapt to the volatile market. “We want to have a stronger defence position since the world is in chaos,” Son said on Thursday.
In an unusually sombre presentation, Son highlighted factors weighing on valuations of high growth tech stocks, ranging from fast-rising inflation and expected interest rate hikes to Russia’s invasion of Ukraine.
SoftBank’s billionaire founder said the company was going to be more circumspect about its investments in China. “It’s not that we won’t be investing in China at all as there are some great companies there, but we want to be investing smaller amounts,” said Son.
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, underscoring long-term concerns about SoftBank’s investment strategy.
Amir Anvarzadeh of Asymmetric Advisors said the losses in the fourth quarter ending March 31 “could pale in comparison to the current implosion in the value of its listed holdings”.
He added: “We suspect SoftBank is having notable capital constraints that could only get worse should this market correction continue.”
Vision Fund, which has about 450 companies in its portfolio, made 43 investments during the fourth quarter. SoftBank also marked down some of its privately held assets in sectors such as consumer, fintech and transportation, adding to the overall loss.
Son tried to include some positive accents, mostly pinning his hopes on the UK chip designer Arm, which SoftBank is planning to list on the Nasdaq stock exchange following the collapse of the sale to chipmaker Nvidia.
Son said the company made “big progress” towards the normalisation of Arm’s China business where the former head of the unit Allen Wu has been embroiled in a dispute with the company, threatening Arm’s IPO.
“In the last two years we were not able to audit Arm China but going forward an auditor will be able to do that, removing the only obstacle to the Arm IPO,” said Son.
He added that he did not expect the IPO to be delayed despite the market conditions and said SoftBank would keep the majority stake in the company after the offering.
SoftBank also recorded a ¥669.5bn ($5.2bn) loss after it liquidated its internal hedge fund SB Northstar that was behind the notorious “Nasdaq whale” trades, which placed outsized derivative bets on US technology stocks stunning the market in 2020.
Additional reporting by Kana Inagaki in Tokyo