SoftBank profit almost wiped out on losses from Vision Fund

Japan‘s SoftBank Group Corp reported a near-total wipeout in quarterly profit on Wednesday, after the Japanese technology investor was whiplashed for a second consecutive quarter by losses at its $100bn Vision Fund.

The dire result is likely to deepen concern about founder Masayoshi Son’s ability to secure funding for a second Vision Fund and give more ammunition to activist investor Elliott Management which has recently emerged as a prominent shareholder.

The numbers are also the latest reminder of the inherent risk in Son’s strategy of betting big on untested startups. The Vision Fund posted an operating loss of 225 billion yen ($2.05bn) for October-December compared with 176 billion yen ($1.6bn) profit in the same period a year earlier.

But Son, who is known for his ebullience and charisma – still rare in corporate Japan – said his company was already turning the corner.

“The tide is turning,” Son told a briefing following the release of SoftBank earnings.

Profit for the overall group reached 2.6 billion yen ($24m) for the quarter versus 438 billion yen ($4bn) a year prior, the technology investor said in a stock exchange filing, well short of analyst estimates.

The result compared with the 345 billion yen ($3.14bn) average of three analyst estimates compiled by Refinitiv.

The Vision Fund, which is backed by Saudi Arabia and has single-handedly changed the face of tech investing, said it had invested $74.6bn in 88 companies as at December-end, at which time those investments were worth $79.8bn.

Investing credentials hit

Son’s investing credentials took a hit in the August-September quarter when the fund was whiplashed by weakness at major bets such as office space-sharing firm WeWork and recorded an $8.9bn operating loss.

Since then a slew of portfolio companies – from hotel-booking platform Oyo to cloud robotics firm CloudMinds – have cut jobs and come under pressure to demonstrate the long-term viability of their business models.

The fund itself has also been losing key employees.

On Wednesday, SoftBank’s shares surged to their highest price in seven months, buoyed by news that a US federal judge had rejected an antitrust challenge to the proposed takeover of subsidiary Sprint Corp by T-Mobile US Inc.

Nevertheless, SoftBank faces pressure to enhance shareholder value after sources told Reuters News Agency last week that US activist hedge fund Elliott Management had amassed a stake of almost $3bn in the tech conglomerate and is pushing for change – including $20bn in stock buybacks.

SoftBank also said it recorded a 332 billion yen ($3.02bn) dilution gain related to its stake in Alibaba Group Holding Ltd following the Chinese e-commerce giant’s secondary listing in Hong Kong in November.