The first financial report for Japanese conglomerate SoftBank Group Corp. after the departure of founder Masayoshi Son revealed the same pattern of billions in losses on risky startup ventures that had plagued the company for years under Son’s leadership.
In contrast to expert expectations of a profit of 205.9 billion yen, SoftBank reported a net loss of 783.4 billion yen ($5.9 billion) for the December quarter. The main contributing issue was the Vision Fund division, which lost 660 billion yen due to falling stock prices for the firms it invested in. For the first time, Son missed the earnings call after the results, allowing his chief financial officer to take questions.
Vision Fund is SoftBank’s Initiative to Invest in Prospective Tech Startups
With the Vision Fund, a type of mega venture capital initiative, SoftBank sprang into startup investment in 2017 and invested more than $144 billion in hundreds of startups over the next five to six years. However, SoftBank fell victim to flops like WeWork Inc. and subsequently saw a severe collapse in the technology sector as investors lost interest in losing firms.
Yoshimitsu Goto, Chief Financial Officer of SoftBank, avoided Son’s frequent historical allusions at a press conference after results in favor of figures intended to reassure investors about SoftBank’s stability and potential. He emphasized again and again that despite having “ample cash” to switch to an aggressive strategy in the future, SoftBank would continue to play safe as long as the markets are difficult.
What’s most important is to take a conservative approach in evaluating the current environment.
I’m still working on making better presentations.
-Yoshimitsu Goto
Investors and analysts have expressed skepticism over Son’s choice to miss earnings calls. Since the 65-year-old billionaire started the business and has made all crucial choices since, his absence makes it difficult to comprehend SoftBank’s strategy.
Son felt he could repeat the success he had with early investments like his support of Chinese e-commerce giant Alibaba. Son converted what was once a reliable, profitable telecom firm into the largest startup investor in the world. His investment machine, however, has now almost completely stopped. SoftBank invested fewer than $350 million in only a few businesses in the most recent quarter, which is about 95% less than its average pace of $6 billion each quarter over the previous five and a half years.
For four consecutive quarters, the Vision Fund segment has lost money and lagged behind its competitors. The two Vision Funds’ combined performance as well as the Latin American funds dropped from a gain of $66 billion to a loss of $6.6 billion. Among the publicly listed firms that saw their stock price decline in the most recent quarter were Indonesia’s GoTo Group and South Korean e-commerce behemoth Coupang Inc.
SoftBank’s Financial Reports Had One Positive Aspect, its Investment at Chip Giant ARM Holdings
A successful initial public offering for ARM Ltd., the chip design company Son purchased in 2016, will be one of the keys to reviving investment activity at SoftBank. Son cited his desire to concentrate on that work as the main reason for leaving the earnings calls, saying that the British business may wind up completing the biggest IPO by a semiconductor manufacturer ever.
For the most recent quarter, ARM recorded strong growth. Revenue increased 28% from the prior year to $746 million, driven by higher use of internet-of-things devices and high smartphone royalty rates. By December, SoftBank now intends to IPO the company.
SoftBank’s reports make one thing evident, the most aggressive tech investor in the world invested billions to boost values, only to see them fall. Son’s Vision Fund no longer has the resources to support its previous expenditure, despite the fact that a downturn in the market would appear to be the ideal moment to be a tech enthusiast.
Source: Bloomberg
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