SoftBank’s Vision Fund plummets to US$18 billion deficit in ‘valley of coronavirus’
Japan’s SoftBank Group Corp announced a startling loss of USD 18 billion at its giant Vision Fund, driving Masayoshi Son’s conglomerate to a record loss and exposing the deepening turmoil caused by the global downturn at its portfolio companies.
The crippling 1.9 trillion yen (USD 18 billion) operating shortfall at the Saudi-backed Vision Fund, including nearly USD 10 billion in losses at office-sharing company WeWork and ride-hailing platform Uber Technologies Inc alone, left SoftBank with its highest annual loss of 1.4 trillion yen.
Son, who was pressured by U.S. hedge fund Elliott Management to make share buybacks and strengthen governance, said SoftBank would generate 1.25 trillion yen against its stake Alibaba Group of China.
“The coronavirus is an unprecedented crisis,” said a strikingly downbeat Son during an earnings presentation, comparing it with the Great Depression.
Son was even more reserved than normal, claiming that some of his tech unicorns had slipped “into the valley of the coronavirus”.
“I believe some of them will fly over the valley,” he said, standing next to a slide showing cartoon unicorns falling into a hole as a lone unicorn with wings escaped to the other side.
The situation has steered the Vision Fund’s portfolio underwater, with its USD 75 billion investment in 88 startups worth USD 69.6 billion at the end of March. The USD 100 billion fund had already yielded two straight quarters of losses before being upended by the epidemic began.
SoftBank reported a loss of USD 7.5 billion on its tech investments, which it attributed primarily to the economic shock caused by the coronavirus. The epidemic has worsened underlying issues at many of its bets on unproven startups.
The business is loosening ties with Alibaba Group, the most significant asset in its portfolio, with Jack Ma, the co-founder of the Chinese e-commerce giant, retiring from the SoftBank board.
SoftBank gave no information about which companies saw write-downs but provided a sector analysis showing the construction and real estate investments were worth less than half the cost amount, with flagship transportation investments underwater as well.
The company has leveraged its investments to provide extra capital for other bets, a strategy that has been put under pressure as valuations plunge, with losses higher than the group’s revised forecast from just last month.
OneWeb, a satellite operator backed by SoftBank, filed for bankruptcy in late March, leading to an impairment loss for investments owned outside the Vision Fund which also includes part of the WeWork stake.
The group pointed to further pain to come, saying if the pandemic continues “uncertainty will remain in its investment business over the next fiscal year.”
Son refused, for the first time, to offer a dividend for the current financial year, underlining the SoftBank pressure.
With his usual emphasis on the total value of SoftBank ‘s assets rather than profits buffeted by the nebulous valuations of the Vision Fund, Son admitted that shareholder value has fallen, and this year net debt has grown.
The demands echo critics who say that SoftBank is owned by Son and gives no clarity on how to reach the valuations that drive its income.
The group has pledged USD 41 billion in assets to be sold or monetised, partly to fund a 2.5 trillion-year buyback to support its share price. It had spent 250 billion yen on share purchases by the end of April.