SoftBank Vision funds post record $39bn annual loss

SoftBank Group has posted record annual investment losses of ¥5.3tn ($39bn) in its series of tech-heavy Vision funds and warned that the war in Ukraine and the US-China dispute continue to pose big market risks.

Yoshimitsu Goto, the tech conglomerate’s chief financial officer, said on Thursday that the company would not miss opportunities to invest in new technology such as ChatGPT, but cautioned that it was not ready to accelerate its deal activity.

For the fiscal year to the end of 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.

Despite an improvement in market conditions, Goto said the biggest source of uncertainty came from geopolitical tensions.

“With no solution in sight, we need to be deeply concerned about the geopolitical risks. Just because the last three months were good . . . we can’t go back to resuming investments,” he added. For the latest quarter, its two Vision funds only invested $400mn.

Kirk Boodry, an analyst at Astris Advisory Japan, said SoftBank was unlikely to go back on the offensive while central banks worldwide were still raising interest rates to control 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.

Following its asset sales, SoftBank’s net cash has increased from ¥2.9tn to ¥5.1tn.

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.

On the lawsuit by Credit Suisse against SoftBank in London to pursue $440mn it claims that its wealthiest clients are owed following the collapse of specialist finance firm Greensill Capital, Goto said it was unfortunate considering its longstanding ties with the Swiss bank.

“I don’t know how many years it will take, but we will undoubtedly win this case,” Goto said. “That’s why we are just sad that something like this has occurred.”