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”.
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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”.
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Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
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