TOKYO: Quarterly profit at SoftBank Group Corp was almost wiped out as the Japanese technology giant was hit for a second straight quarter by losses at its US$100 bil (RM413.85 bil) Vision Fund.
Wednesday’s dismal results could further dampen investor enthusiasm for founder Masayoshi Son’s big bets on untested start-ups. While Son told a news conference SoftBank had turned a corner, he also said he has been forced to scale back a second Vision Fund while investing with only SoftBank’s own capital.
That marks a major climbdown from July, when SoftBank said it had attracted US$108 bil in pledges for a second mega-fund.
More pointedly, it shows how the bailout of start-up WeWork last year and other missteps have put a chill on the tech investing scene and given SoftBank shareholder Elliott ammunition to lobby for change.
“We have caused a lot of concern,” Son said in Tokyo following the results, adding he needs to “give everyone piece of mind” to secure outside funds for Vision Fund 2.
Group profit was ¥2.6 bil (RM99.32 mil) in the October-December quarter versus ¥438 bil a year before. The Vision Fund posted an operating loss of ¥225 bil for the quarter compared with a ¥176 bil profit in the same period a year earlier.
But Son, known for an ebullience and charisma that is still rare in corporate Japan, said the company’s performance was already improving.
“The tide is turning,” he said.
Big stake
“Softbank should focus on one thing, shareholder value creation,” said Jeffries analyst Atul Goyal in a note to clients ahead of the earnings.
Son pointed to a rally in prices at the Vision Fund’s handful of listed investments and news overnight that a US federal judge had rejected an antitrust challenge to the proposed merger of SoftBank’s Sprint Corp and T-Mobile US Inc.
Shares of SoftBank finished up 12% in Tokyo before the results and after the US court decision.
Son has long argued SoftBank’s shares are undervalued, a position shared by US hedge fund Elliott Management, which has recently emerged as a prominent shareholder. Elliott, one of the world’s best known activist investors, is pushing for changes including US$20 bil in stock buybacks, sources said last week.
SoftBank has held discussions with Elliott and is aligned on improving shareholder value, Son said, adding that while open to potentially buying back shares, he was in “no hurry” to sell part of a 26% shareholding in Alibaba to fund buybacks.
The Vision Fund, which is backed by Saudi Arabia and has single-handedly changed the face of tech investing, said it had invested US$74.6 bil in 88 companies as at the end of December, when those investments were worth US$79.8 bil.
Analysts have said it is difficult to evaluate SoftBank’s performance due to a lack of disclosure around Vision Fund’s internal valuations.
Son’s investing credentials took a hit in the August-September quarter when the Vision Fund recorded a US$8.9 bil operating loss.
Since then, a slew of portfolio companies – from hotel-booking platform Oyo to cloud robotics firm CloudMinds – have cut jobs and come under pressure to demonstrate the long-term viability of their business models.
The fund itself has also lost key employees. – Feb 12, 2020, Reuters
