SoftBank’s annual investment losses from its Vision funds have hit a record ¥5.3tn ($39bn) even as the tech conglomerate has launched a series of asset sales to address plunging valuations and a rise in global interest rates.
For the fiscal year through March, the Japanese company logged a net loss of ¥970.1bn, compared with a loss of ¥1.7tn the previous year. Analysts had expected a loss of only ¥166.5bn, according to S&P Capital IQ. In the March quarter, investment losses from Vision Fund 1 and 2, as well as its Latin American funds, amounted to ¥250bn.
SoftBank has turned to what founder Masayoshi Son has called “defence mode”, halting new investments by its funds, preparing for the listing of its UK chip designer Arm and further reducing its stake in Chinese ecommerce group Alibaba.
It is also close to a deal to sell asset manager Fortress Investment Group to Abu Dhabi’s sovereign wealth fund Mubadala for as much as $3bn, according to people close to the talks.
While the valuation of some of the group’s biggest publicly traded investments such as South Korean ecommerce group Coupang and China’s Didi Global recovered during the March quarter, analysts said losses in its privately held portfolio were bigger than expected.
Kirk Boodry, an analyst at Astris Advisory Japan, said SoftBank’s conservative stance was likely to continue on the back of lingering market uncertainty following the collapse of US lender Silicon Valley Bank and as central banks worldwide continue their battle against inflation.
“The environment is definitely more difficult because interest rates have increased and we don’t really yet have visibility of a pause. In that kind of environment, it’s going to be difficult for SoftBank because they borrow a lot of money,” said Boodry.
The Japanese group sold about $7.2bn worth of Alibaba shares in the last quarter through prepaid forward contracts after a record $29bn selldown last year.
The forward sales, revealed through a Financial Times analysis of regulatory filings with the US Securities and Exchange Commission, will eventually cut SoftBank’s stake in the $262bn Chinese ecommerce group to just 3.8 per cent.
In addition to the sale of Alibaba shares, SoftBank is also preparing for a blockbuster initial public offering of Arm in New York.
Son has stepped away from public view, focusing his energy on changing Arm’s business model so that it can generate higher revenues ahead of its listing this year.
For the latest quarter, Arm logged a net loss of ¥6.2bn compared with a profit of ¥10.1bn a year earlier, while revenue increased 28 per cent to ¥92.8bn.
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