SoftBank Vision Fund Loses $32 Billion on Weak Startup Values
By Min Jeong Lee and Takahiko Hyuga
Bloomberg
May 11, 2023, 6:05 AM UTC
SoftBank Group Corp.’s Vision Fund unit reported a record annual loss after a recent global stock market rebound failed to outweigh three straight quarters of hefty writedowns.
The Vision Fund unit lost ¥4.3 trillion ($32 billion) in the year ended March, compared with a ¥2.6 trillion loss the previous year. It was the segment’s biggest loss since founder Masayoshi Son launched his first Saudi and Abu Dhabi-backed fund in 2017.
The Nasdaq 100 index, a benchmark for tech stock performance, rallied 20% during the March quarter, lifting share prices for some of SoftBank’s biggest investments. Coupang Inc. gained around 9% and Didi Global Inc. about 20% during the period. But most of the Vision Fund portfolio firms are still reeling from the brunt of last year’s stock market collapse.
Many of the privately-held companies that SoftBank’s invested in are not yet profitable, while the IPO market remains lackluster. “I remain cautious about the rest of the year, and private companies could continue to drag down valuations,” said Victor Galliano, an independent analyst who publishes on Smartkarma.
The billionaire Son has said the company will remain in defense mode until financial markets recover. SoftBank is in the process of divesting a number of its assets to clean up its balance sheet and appease worried investors, while promoting the highly-anticipated initial public offering of Arm Ltd.
Bankers have pitched a valuation of between $30 billion to $70 billion for Arm’s listing, a wide range reflecting the challenges of valuing the firm against a backdrop of volatile semiconductor equity prices.
“The Arm story is key and valuation is important, but that may be more at the mercy of markets than SoftBank would like,” said Mio Kato, an analyst from LightStream Research who publishes on Smartkarma.
SoftBank offloaded an additional $7.3 billion in Alibaba shares this year through prepaid forward contracts, according to a Bloomberg analysis of regulatory filings. This may have reduced SoftBank’s Alibaba stock to around 3.8%. Last month, the Japanese conglomerate said it is selling its early-stage venture capital arm SoftBank Ventures Asia Corp. to an entity led by Taizo Son, the younger brother of Son. Terms of the deal weren’t disclosed.
The sale of the startup incubator could ease SoftBank’s financing burden, while offloading Alibaba shares in the wake of the e-commerce leader’s plans to split into six parts would help maximize SoftBank’s divestment income, Bloomberg Intelligence analyst Marvin Lo wrote in a note last month.
SoftBank is nearing a deal to sell Fortress Investment Group to Mubadala for as much as $3 billion, the Financial Times reported, citing unidentified people briefed on the matter.
That would help SoftBank’s share price, Galliano said. “The focus for now has to be realizing investments where possible and reducing leverage, and we look forward to perhaps more disclosure on Masa’s debts with the group.”
Investors are not yet declaring the bottom for the venture capital sector, given the recent collapses of Silicon Valley Bank and First Republic Bank, which provided funding support to the startup ecosystem.
“Markets remain volatile and the near-term outlook for Vision Fund remains murky,” said Kirk Boodry, an analyst with Astris Advisory.
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SoftBank Vision Fund Loses $32 Billion on Weak Startup Values - Bloomberg (archive.ph) |
