A collapse in the value of its flagship tech investments will cause a huge loss to be posted by SoftBank, the Japanese investment conglomerate warned on Monday.
In the fiscal year through March 31, 2020, it expected an operating loss of 1.35 trillion yen ($12.5 billion), the Japanese company said. in the previous year, the company had reported an operating profit of more than 2 trillion yen.
“The difference in operating income is mainly attributable to the expected recording of [an] investment loss of approximately 1.8 trillion yen [$16.7 billion] at SoftBank Vision Fund … resulting from a decrease in the fair value of investments due to the deteriorating market environment,” SoftBank said in a statement.
The company added that the earnings will also be significantly impacted by the loss from the bankrupt internet satellite startup OneWeb, and troubled coworking provider WeWork, in addition to the huge losses that have been incurred from investments made by SoftBank’s $100 billion Vision Fund.
Pressure on SoftBank’s global tech portfolio, which also includes Uber, Didi, OYO and Grab, have also been piled on because of world wide restrictions on work, travel and social distancing imposed by governments and local authorities to prevent the spread of the coronavirus pandemic.
After some of his biggest bets collapsed in value, very defensive stance has been forced to be taken by SoftBank founder and CEO Masayoshi Son, who has cast himself as a bold, visionary investor. The company made a surprise announcement last month of what essentially was a quick sale of the company’s assets worth $41 billion aimed to fund a share buyback of the company as well as to reduce the rising debt load of the company.
Large stakes in flashy technology startups in the area of ride-hailing, robotics, agriculture and other areas that kits founder Son had believed were at the core of shaping the future were lapped up quickly by SoftBank with the massive Vision Fund. The company helped the startups to expand rapidly by making huge instantaneous investments of hundreds of millions or even billions of dollars which also helped to significantly boost the valuations of the startups.
However a number of such investments were under-performing even before the coronavirus pandemic caused the turbulence in the global financial markets.
There was extremely muted reception on the stock markets and at Wall Street for Uber and WeWork – two of the biggest investments of SoftBank, over concerns of investors of the tech startups making steep losses continuously. While investors backed away from Uber after it went public and the share of the company are currently trading well below the IPO price, WeWork was forced to pull out from a much hyped IPO last year and had to be saved by a bailout package by SoftBank.
Jobs of more than 7,300 employees of about a dozen startups in which SoftBank had made large investments were culled in the four months ending in February, according to reports.
Still plans for a second Vision Fund are being touted by Son. But as he said in February, “I think that our next fund size should be a little bit smaller, because we have caused concerns and anxiety to a lot of people.”
(Adapted from CNN.com)