Japanese conglomerate SoftBank's Vision Fund investment division reported a loss of 297.5B yen ($2B) in the first quarter of this year. Losses in Q1 2023 were narrower than the 2.2T yen (~$16.3B) loss reported in the same quarter a year ago.
The financial performance of Q1 2023 brings Vision Fund's total fiscal year loss to 4.3T yen (~$32B), nearly double the 2.6T yen (~$19B) loss reported in the previous fiscal year. SoftBank Group posted an overall annual loss of 5.3T yen ($39B).
According to Bloomberg, the losses were higher than expected, considering the rebound in tech stocks this year. The Nasdaq 100 benchmark rose 20% in March, increasing the value of SoftBank's publicly held stocks. Values of portfolio publicly traded stocks, including Coupang and Didi Global, showed gains of 9% and 20%, respectively. SoftBank gained $1.9B after the rally of publicly held stocks in the recent quarter. However, the markdowns on private portfolio companies were higher than anticipated, contributing to the fund's poor financial performance. The Japanese investor lost $3.9B due to valuation markdowns of portfolio startups in the quarter. The fair value of SoftBank's portfolio at the end of Q1 2023 was $138B, $2.3B less than the previous quarter.
Asymmetric Advisor's market strategist Amir Anvarzadeh said, "Unlisted names which account for something like 60% of its total investments had not been marked down more than 20%." SoftBank CFO Yoshimitsu Goto confirmed that the firm slashed the valuations of almost 350 portfolio companies.
Vision Fund invested $3.14B into startups in the fiscal year, down 90% compared to the previous year. Both Vision Funds invested only $400M in the recent quarter. SoftBank sharply pulled back its investment activity in mid-2022 after losses mounted at the Vision Fund. It slashed the pay for its top executives to narrow losses. Earlier this year, the firm diluted its stake in Alibaba from 13.7% to 3.8% to recoup losses suffered on failed bets. The firm could nab $7.3B from its liquidation, which was used to cover debt and other obligations.
The firm is also looking to sell its South Korean VC arm, SoftBank Ventures Asia, to SoftBank founder and CEO Masayoshi Son's youngest brother Taizo Son in a deal valued at $150M (200B won), representing a 65% premium over its book value from 2021. Taizo Son heads the Singaporean VC firm Mistletoe.
Per FT, SoftBank is also looking to sell its stake in asset management firm Fortress Investment Group to Mubadala for nearly $3B.
Goto expects the firm to gradually start investing more actively. He added, "Last year, unless something unusual happened, we would rather have passed on opportunities. But this year, if we're comfortable, after checking every aspect, we want to take steps, one by one." Goto talked about how Masayoshi Son — who was absent from the investor call — was excited about the prospects within the generative AI sector.
SoftBank's focus is solely on the portfolio startup Arm's upcoming IPO listing in New York, which, if successful, could give it the boost to start making investments again. Bankers have pitched British chip designer Arm's valuation between $30B to $70B. Arm reported a net loss of 6.2B yen ($46M) in the recent quarter.