SoftBank’s Vision Fund loses record $32 billion in FY23 on weak tech valuations

SoftBank Group Corp.’s Vision Fund unit reported a record annual of $32 billion in the year ended March 2023, compared to a 2.6 trillion yen loss in the corresponding period last year, due to weakness in tech valuations around the globe, even as a recent rally in tech stocks failed to outweigh the losses. It was the segment’s biggest loss since the Japanese conglomerate's founder Masayoshi Son launched his first Saudi and Abu Dhabi-backed fund in 2017.

SoftBank reported an annual loss of 970 billion yen (about $7.2 billion) for the year ended March 31, 2023. In the previous fiscal year, the Vision Fund unit lost 2.6 trillion yen on investments, dragging the company into a net loss of 1.7 trillion yen ($12.6 billion).

The Nasdaq 100 index, a benchmark for tech stock performance, rallied 20 per cent during the March quarter, lifting share prices for some of SoftBank’s largest listed portfolio companies. Coupang Inc. gained around 9 per cent and Didi Global Inc. about 20 per cent during the period. However, most of the Vision Fund portfolio firms are still reeling from the brunt of last year’s stock market collapse. 

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The brainchild of Masayoshi Son, SoftBank’s Vision Fund comprises Vision Fund 1 and Vision Fund 2 and invests in high growth stocks, which have faced headwinds from rising interest rates globally causing investors to sell out of riskier equities such as tech.

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. Last month, Arm filed confidentially for a listing in the U.S. Arm previously said it would list in the US over the UK, dealing a blow to the London stock exchange. 

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. Arm reported sales of 381.7 billion yen in the fiscal year, up more than 27 per cent year-on-year. The company’s pre-tax income rose 18 per cent year-on-year to 48.6 billion yen.

Over the past year, SoftBank has been exiting some of its highest-profile investments to raise cash. It narrowed its overall losses through sales of shares in T-Mobile and Alibaba. It offloaded an additional $7.3 billion in Alibaba shares this year through prepaid forward contracts, according to Bloomberg. This may have reduced SoftBank’s Alibaba stock to around 3.8 per cent. In August, it said it had sold its remaining stake in U.S. ride-hailing giant Uber.

A prolific startup investor in India, SoftBank saw the fair value of its biggest listed Indian portfolio company Paytm rise to $0.6 billion at the end of March quarter from $0.5 billion as of December. During the January-March quarter, Paytm rose 20 percent. PB Fintech, while a small investment for SoftBank, also saw its shares jump over 40 percent in January-March.

The companies that SoftBank has invested in are well capitalized, according to the conglomerate's chief financial officer Yoshimitsu Goto. He said that SoftBank has a number of companies ready to go public, which are valued at a combined $37 billion.

During a press conference on May 11, Goto said that it has been an ‘unstable’ year marked by geopolitical risks and financial system instability, citing the collapse of Silicon Valley Bank and issues at Credit Suisse.

With inputs from agencies