The decline in the value of some of its successful IPOs and China’s crackdown on the tech sector has led to a record loss.
SoftBank Group Corp. reported a record loss at its Vision Fund unit as the value of public holdings such as Coupang Inc. and Didi Global Inc. plummeted.
The unit’s loss in the three months ending September 30 was 825.1 billion yen ($ 7.3 billion), beating the 788.6 billion yen loss the company posted in the middle. of the amortizations caused by the pandemic. Overall, the Tokyo-based company had a net loss of 397.9 billion yen in the period.
Masayoshi Son’s Vision Fund has been a volatile contributor to profit and loss since its inception in 2017. The first recession began in 2019 with the disappointing public debut of Uber Technology Inc. and the implosion of WeWork, followed by the impact of the coronavirus.
Then, a global surge in tech stocks pushed Vision Fund’s earnings to new records for three consecutive quarters last fiscal year, thanks to the box office charts of South Korean e-commerce giant Coupang, American delivery company DoorDash. Inc. and Chinese online property platform KE Holdings Inc. Now, the falling value of some of those companies and the crackdown on the tech sector by Chinese regulators have pushed the business back into the red.
“If you look at the Vision Fund’s performance so far this year, pretty much everything they’ve brought to the market so far has lost money since it went public,” said Kirk Boodry, an analyst at Redex Research in Tokyo, before the earnings announcement. “That is an incredibly poor record. They have been behind many overpriced IPOs. It makes you wonder if this whole investment cycle of taking companies public and then getting your money back is broken. “
SoftBank shares are down 24% this year.
SoftBank’s losses billions of dollars
KE Holdings -2.2
Complete Truck Alliance -1.2
The unrealized loss in the valuation of public companies totaled $ 17.7 billion in the quarter in the two SoftBank Vision Funds. Coupang was responsible for $ 6.7 billion of the loss. Two quarters earlier, South Korea’s e-commerce leader marked Son’s best performance since the Alibaba Group Holding Ltd. listing when he contributed $ 24.5 billion to Vision Fund’s earnings.
SoftBank’s Chinese startup portfolio was hit particularly hard after the country’s regulators launched a crackdown on the tech sector. Didi, whose debut at the end of the previous quarter was one of the largest U.S. deals of the past decade, lost $ 6.1 billion in the quarter and Uber-type truck startup Full Truck Alliance Co. was down $ 1.2 billion. millions.
KE Holdings Inc., which runs Beike’s online property service, lost $ 2.2 billion in value. The little-known Chinese startup gave SoftBank an unrealized profit of $ 5.1 billion when it went public in August 2020, pushing Vision Fund’s earnings to a new record for that quarter. Although regulators have not targeted the company directly, its shares are down more than 70% from its peak and are trading below the IPO price.
“Chinese regulators have no incentive to clear things up and publicly signal that the crackdown is over,” Boodry said. “This uncertainty about the future of China’s technology may last for a while.”
Losses in the public portfolio were offset by 455.9 billion yen of realized earnings as SoftBank leveraged some of its most successful investments. SoftBank sold $ 2.2 billion worth of DoorDash shares in August and raised about $ 1.69 billion from a sale of Coupang shares in September.
They are also significantly reduced its controversial stock and options trading program, liquidating all of its holdings in Amazon.com Inc., Taiwan Semiconductor Manufacturing Co., and PayPal Holdings Inc. SoftBank had a total of $ 5 billion in highly liquid listed stocks. . , “Down from $ 13.6 billion at the end of the prior quarter.
“For the next few quarters, we don’t have much to look forward to in the Vision Fund business,” Boodry said. “Sure, there are some IPOs nearby that you can point to, but all the negative noise drowns it out. And none of them are going to be as big as Didi. “