SoftBank’s Vision Fund suffered a record annual investment loss of 5.3 trillion yen ($39 billion), even as the tech conglomerate has launched a series of asset sales in response to plunging valuations and rising global interest rates.
The Japanese company recorded a net loss of 970.1 billion yen in the fiscal year ended March, compared with a loss of 1.7 trillion yen a year earlier. Analysts had expected a loss of just 166.5 billion yen, according to S&P Capital IQ. Investment losses at Vision Funds 1 and 2 and its Latin America fund amounted to 250 billion yen in the March quarter.
SoftBank has shifted into what founder Masayoshi Son calls “defensive mode”, halting new investments from his fund, preparing for the listing of its British chip designer Arm and further reducing its stake in Chinese e-commerce group Alibaba.
It is also close to a deal to sell asset manager Fortress Investment Group to Abu Dhabi sovereign wealth fund Mubadala for as much as $3 billion, according to people familiar with the matter.
While valuations of some of the group’s largest publicly traded investments recovered in the March quarter, such as South Korea’s e-commerce group Coupang and China’s Didi Chuxing, analysts said losses in its privately held portfolio were larger than expected.
Kirk Boodry, an analyst at Astris Advisory Japan, said SoftBank’s conservative stance is likely to continue amid lingering market uncertainty following the collapse of U.S. bank Silicon Valley Bank and as global central banks continue to battle inflation.
“The environment is definitely more difficult because interest rates have gone up and we haven’t really seen a pause. In that environment, SoftBank is going to struggle because they’ve borrowed a lot of money,” Boodry said.
The Japanese group sold about $7.2 billion worth of Alibaba shares through prepaid forward contracts last quarter after a record $29 billion sell-off last year.
The forward sale would eventually reduce SoftBank’s stake in the $262 billion Chinese e-commerce group to just 3.8%, according to a Financial Times analysis of regulatory filings with the US Securities and Exchange Commission.
In addition to selling its stake in Alibaba, SoftBank is preparing for Arm’s blockbuster initial public offering in New York.
Son has faded from the public eye to focus on changing Arm’s business model so it can generate higher revenue ahead of its IPO this year.
In the latest quarter, Arm recorded a net loss of 6.2 billion yen, compared with a profit of 10.1 billion yen a year earlier, while revenue rose 28 percent to 92.8 billion yen.