The Decline In Tech Valuations Continues To Hit SoftBank
Aa
Share
After a year of technological failure, Tokyo-based SoftBank is still feeling the effects of peak spending in the market.
The losses
SoftBank Group Corp. on Tuesday reported a quarterly loss of $5.8 billion in its start-up mutual fund division known as Vision Fund. , most of the company's quarterly loss of $5.9 billion.
Investment losses currently piling up in SoftBank's Vision Fund department give a more accurate picture of the company's plight.
The results highlight the depth of SoftBank's decline, which spent more than $140 billion in Vision Fund segment between 2017 and last year, an amount that eclipsed Silicon Valley's largest venture capital firms and went to companies like Uber Technologies, DoorDash and WeWork. At its peak, it turned that money into a profit of $66.4 billion.
For example, publicly traded shares held by SoftBank's flagship Vision Fund fell 37% from SoftBank's initial investment, representing a loss of $11.5 billion. SoftBank, meanwhile, said its holdings in private firms were yielding a modest 4.6% profit, or $1.6 billion above costs.
The recent losses are due in large part to a reporting quirk in the private investment market that has led investment managers to take losses on private start-ups for longer than publicly traded shares.
It is not a good time to invest in startups
These losses also forced SoftBank to withdraw from its aggressive investing style. SoftBank Group Corp. was the world's largest startup investor in 2021. Now he hardly invests at all.
The Vision Fund unit saw approximately $300 million in new investments, down 98% from the $15.6 billion spent in the three months of mid-2021, when SoftBank and its chief executive Masayoshi Son were known to shower money on the foamy market startups.
Read next: The Court In Munich Decided In Favor Of BMW| FXMAG.COM
SoftBank Group CFO Yoshimitsu Goto told reporters on Tuesday that it simply is not a good time to invest in startups.
SoftBank's investment strategy of pouring money into underperforming startups embodied the go-go attitude of the last tech boom. His big loss is a timely reminder of the downsides of this approach – something traders should keep in mind.
Investment in ARM
The CEO decided late last year that he would not speak at profit meetings for the time being because he said he wanted to focus on Arm, a UK-based chip design company owned by SoftBank. SoftBank continued to push for an IPO of ARM by March 2024 and has made progress. An Arm representative said no decision had been made on where to put the list. Officials in the UK government and the London Stock Exchange pushed hard for Arm to be listed in London, perhaps in addition to a New York listing.
SoftBank shere price
Between early 2021 and early 2022, the company's share price fell by more than half as higher interest rates and China's crackdown on leading tech companies hit SoftBank's portfolio.
Last November, the stock rose to a record high above JPY 7,000, but then fell. Since the new year, the share price has been rising from 5,640 JPY until it breaks above 6,000. This week, the stock traded at 6,332 JPY, but fell back to below 6,000, and is now at 5,948.00 JPY.
Source: wsj.com, finance.yahoo.com
