The Vision Fund segment reported a loss of ¥258.9 billion (US$1.7 billion) through the end of September, after it wrote down the WeWork stocks and warrants held by the Vision Funds, ahead of the company’s bankruptcy filing this week.
Valuation declines in portfolio firms such as Sensetime Group Inc, AutoStore Holdings Ltd and Symbotic LLC further hurt the segment.
Although the loss was smaller than the ¥1.02 trillion loss a year ago, it casts doubt over SoftBank’s claims that the worst is over for the Vision Fund, which funneled more than US$140 billion into hundreds of loss-making startups worldwide.
There is little visibility into the performance of the majority of the Vision Fund’s unlisted portfolio companies.
“It’s hard to be optimistic, as there’s a bit of uncertainty over how things will develop in the near term,” said Tomoaki Kawasaki, a senior analyst at Iwai Cosmo Securities Co. “But attention is now on how and whether SoftBank’s investments in AI-related firms will boost shareholder value and net asset value.”
The Vision Fund’s loss and a hit from a weak yen contributed to a group-wide net loss of ¥931.1 billion, down from a profit of ¥3.03 trillion last year when SoftBank cashed in on its stake in Alibaba Group Holding Ltd. Analysts on average had estimated a group net income of ¥203.4 billion.
SoftBank is trying to regain its footing after its Vision Fund unit lost US$53 billion in the last two years on startup missteps. The US$4.9 billion initial public offering of chip unit Arm Holdings Plc has given SoftBank some capital to pursue deals.
Founder Son has made a series of bets this year on autonomous technologies, particularly in transportation and logistics. They include investments in autonomous trucking startup Stack AV, an AI-using warehousing joint venture with Symbotic Inc and a follow-on investment in Vision Fund portfolio firm and navigation software maker Mapbox Inc.
“There is a risk that FOMO on generative AI drives the narrative,” Astris Advisory analyst Kirk Boodry said in a note to investors prior to the announcement. “Clearly if Masa is keen on something, then SoftBank will make that investment, leaving any discussion about guardrails and/or a more conservative approach academic.”
As SoftBank invested billions of dollars in unprofitable startups beginning in 2017, it inflated valuations worldwide before they were punctured by China’s tech crackdown from 2020 and the US Federal Reserve’s rate hikes last year. The company spent months writing down losses while limiting new investments.
SoftBank appears to be directly investing in recent deals, bypassing the Vision Fund. The second Vision Fund, although wholly-funded by SoftBank, requires approval from an additional investment committee.
At the end of September, SoftBank Group had approximately 110 portfolio companies, including Alibaba, T-Mobile US Inc and Deutsche Telekom AG.
Prior to SoftBank’s results, chip unit Arm gave a disappointing sales forecast on a prolonged smartphone slump and uncertainty regarding license agreements, sending the stock down to below its September IPO price of US$51 per share.