Shares in Japan’s investment company SoftBank Group slid by almost a tenth after it “sank deeper into the red” in the third quarter, says Megumi Fujikawa in The Wall Street Journal. Its technology investments “struggled”. The Vision Fund 1 made a small profit of £2.4bn.
However, this was outweighed by losses from other Vision Fund vehicles and $1.6bn in losses related to its stake in and financial support for WeWork, one of its most high-profile investments, which has just filed for bankruptcy. The Vision Funds investment unit posted a $1.7bn loss, with SoftBank as a whole losing $6.2bn.
The loss on WeWork shouldn’t “have been a surprise” given that the office-rental company’s problems have already been well documented for many years, says Breakingviews. What did raise eyebrows was the fact that SoftBank made an overall loss, when analysts had pencilled in a $1.2bn profit. As a result, it is “little wonder” that many investors will still be “contemplating the abyss” and inclined to ignore SoftBank’s chief financial officer Yoshimitsu Goto’s insistence that the Vision Funds have “hit the bottom”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Goto argues that if you strip out “a host of expenses”, its Vision funds actually made a small profit, says Min Jeong Lee on Bloomberg.
He also claims that “there is more than $29bn of assets in [the] portfolio that SoftBank may be able to cash in soon”, citing, among others, TikTok parent ByteDance. Nonetheless, investors are extremely sceptical about this given that there is “little visibility into the performance of the majority of the Vision Fund’s unlisted portfolio companies”.
There is some good news, however, says Lex in the Financial Times. SoftBank has reduced its exposure to geopolitical risk by selling most of its stake in Chinese tech giant Alibaba over the past two years. Still, “the timing could have been better if [SoftBank] was going to cash in on its most lucrative investment”. Beijing’s crackdown on tech has wiped 72% off Alibaba’s shares from the 2020 peak.
And the sales “remove a safety net” that reassured SoftBank’s shareholders – selling some of Alibaba’s shares ensured that SoftBank produced a profit in the third quarter of 2022. Investors will now be hoping that SoftBank’s founder and CEO Masayoshi Son is “hunting out a safety net to replace Alibaba”.
Nevertheless, despite the WeWork disaster and the sale of Alibaba, Son is unlikely to stop “making billion-dollar bets on technology companies”, any time soon, says Max Kendix in The Times. While pledging to “study what went wrong and try to do better with its future venture capital investments”, Yoshimitsu Goto confirmed that SoftBank has been “carefully restarting” investment, “focusing in particular on artificial intelligence”.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Related articles
- Japan is back: Three Japanese stocks to ride the rebound
- 5 top UK tech stocks
- The Greensill saga: what’s it about and what does it mean for you?
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
Share buybacks rise in the UK – what effect will it have?Share buybacks are gaining popularity in the UK – good news for investors
-
Is now the time to buy Marshalls?Former market darling Marshalls, a landscaping and building products supplier, looks too cheap. Is it time to buy this once-admired stock?
-
Top UK stocks with healthy cash flows and dividend yieldsThree promising UK stocks according to Alan Dobbie, co-manager, Rathbone Income Fund
-
Warren Buffet invests in Domino’s – should you buy?What makes Domino's a compelling investment for Warren Buffet's Berkshire Hathaway, and should you buy the UK-listed takeaway pizza chain?
-
4Imprint makes a strong impression – should you buy?4Imprint, a specialist in marketing promotional products, is the leader in a fragmented field
-
Invest in Glencore: a cheap play on global growthGlencore looks historically cheap, yet the group’s prospects remain encouraging
-
How to save the dying UK stock marketThe UK stock market is in long-term decline. To fix that, we must first recognise why equity markets exist and who they should serve
