The world’s largest technology investor Japan’s SoftBank announced Monday it lost $23.4 Billion in the second quarter. It was the company’s largest ever quarterly net loss with the company’s Vision Fund losing 2.33 trillion yen ($17.28B) in Q2. With the Nasdaq Composite down 22.4% for the second quarter and -29.5% for the year the results were expected. Tiger Global Management flagship hedge fund was down 50% in the first half of the year and Cathie Wood’s Ark Innovation ETF was down more than 57% over the same period. SoftBank also were hit by a foreign exchange loss of 820-billion-yen foreign exchange loss from the weaker yen.
Earnings
“The loss is the biggest in our corporate history and we take it very seriously,” SoftBank founder Masayoshi Son said during a press conference after the results.
Highlights
- Reported a record 3.16 trillion-yen ($23.4 billion) net loss
- The Vision Fund segment posted a loss of 2.33 trillion yen ($17.28B) over the quarter.
- The fund’s most recent loss beats its previous record, set in the first quarter, which saw SoftBank’s vision fund lose 2.2 trillion yen ($16.3B).
- Top executives are leaving the company, former Chief Operating Officer Marcelo Claure left earlier this year, while former Chief Strategy Officer Katsunori Sago resigned in 2021.
- SoftBank founder Masayoshi Son said the company will need to scale back its operations in light of its most recent results.
- SoftBank reported a 820-billion-yen foreign exchange loss because of the weaker yen.
- Raised $10.5 billion by entering forward contracts related to Alibaba Group Holding Ltd and also procured $6.8 billion by entering forward contracts on and after July
- SoftBank said such measures had resulted in a large improvement in its loan-to-value ratio
“When we were turning out big profits, I became somewhat delirious, and looking back at myself now, I am quite embarrassed and remorseful,” Son said at a news conference Monday.
Vision Fund
- Vision Fund losses included 293.4 billion yen for Coupang, 235.9 billion yen for SenseTime Group Ltd. and 220.7 billion yen for DoorDash Inc. Drops at AutoStore Holdings and WeWork Inc were huge also.
- The company exited its holding in Uber Technologies Inc yielding a $1.5 billion profit on a $7.7 billion investment it first made in 2018.
- Rajeev Misra, the long-time head of the Vision Fund, is stepping away from most of his responsibilities and will start his own investment fund.
“For SoftBank vision fund, we know we have to reduce operational costs substantially,” Son said. “Our vision remains the same, our beliefs remain the same. But we know we have to reduce operational costs, including headcount. For new investments, we have to be more selective.”
Vision Fund 2 and private holdings:
Mr. Son’s foreign investors passed on the Vision Fund 2, with SoftBank funding it all with $56 billion into the fund. It was spread around mostly during 2021, when valuations of startups surged to prices well above historic norms.
- Shares of ByteDance Ltd., the Chinese parent of TikTok, have slumped more than 25% since last year in private markets,
- Swedish buy-now-pay-later company Klarna Bank AB had its valuation slashed 85% in a recent funding round compared with June 2021, Bloomberg News has reported.
Arm Ltd IPO
Softbank’s $32 billion purchase of chip designer unit Arm Ltd has also been impacted by the Semiconductor slump. NVIDIA warned today its Q2 revenue will be $6.7 billion versus its prior outlook of $8.10 billion due primarily to a lower sell-in of gaming products. $NVDA shares fell to $174.61, -$15.32, -8.1% by morning. Softbank has plans for an initial public offering. Son has said he aims to make the offering the biggest-ever for a chip company but clearly to extrude maximum value he has to wait.
Buybacks
SoftBank has had a number of aggressive buyback programs. It only recently announced a 1 trillion yen buyback program through September. That, as well as expectations that the company may launch another buyback program later this year, have helped its shares gain about 5% this year.
Son has been taking defensive measures. He raised $10.5 billion by entering forward contracts related to Alibaba Group Holding Ltd. and also procured $6.8 billion by entering forward contracts on and after July
SoftBank said such measures had resulted in a large improvement in its loan-to-value ratio, a key metric Son tracks.
The company also exited its holding in Uber Technologies Inc.
SoftBank’s Masayoshi Son warning for tech bulls
“We were in a kind of bubble on valuations,” Son said in Tokyo after releasing earnings, “If we had been more selective and invested better, we wouldn’t have received this heavy blow.”
“I understand the desire to get impatient while prices are cheap, but if we do that we might suffer a serious wound that we can’t recover from,” Son warned.
The Tech Wreck Travelled Down Fast
The technology sector was hit hard in the first half of the year, especially Q2. The Japanese sector was hit even harder and with the weakening Yen the losses were compounded for Softbank. SoftBank also reported an 820-billion-yen foreign exchange loss because of the weaker yen.
Source: TC, Bloomberg
From The TradersCommunity News Desk