SoftBank lost $ 26 billion from technology investments amid sell-offs

Approximate results in the Tokyo conglomerate come at a time when investors around the world are facing a sharp decline in technology stocks, especially young, fast-growing companies, which until recently were attractive investments for investors.

Rising interest rates and other global challenges have forced investors to flee unprofitable high-priced companies, causing pain far beyond SoftBank. The popular exchange-traded fund ARK Innovation, managed by Katie Wood, has fallen in price by about 60% year on year, while many hedge funds have been losing out month after month.

“If you’ve owned growth shares this year like we did,” Altimeter Capital founder Brad Gerstner wrote Thursday, “you’ve had your face ripped off.” In recent years, the technology-focused hedge fund has been a major investor in pre-IPO startups, including Uber Technologies Inc.

and Snowflake software Inc.

Mr Son opened a video presentation for investors defending SoftBank’s financial condition, saying the company’s debt level is manageable, its cash is enough to cover the bond’s immediate maturity and that it still has profits in its giant technology fund. He said the company had increased its cash reserves by borrowing and selling shares, trying to address investors ’concerns about the company’s high debt burden.

SoftBank reported a total loss of $ 13.2 billion for the fiscal year ended March 31, including growth in divisions other than its technology funds, the biggest loss of the year, exceeding the previous record set two years ago. In a firm presentation on income, Mr. Son also referred to the pressure from Chinese repression on private business and rising interest rates.

The company has been hurt by investments in numerous startups in its $ 100 billion Vision Fund, the world’s largest private equity fund that was raised five years ago with the intention of sowing a generation of new technology giants.

Among the biggest bad bets was the Chinese company Didi Global Inc.,

faced with regulatory pressure in Beijing. As of the end of last quarter, the Vision Fund had lost $ 9.7 billion of the $ 12.1 billion it had invested in Didi, the company said.

More awaits even more: SoftBank said its holdings in Vision Fund public companies fell by more than $ 13 billion after its fiscal year ended March 31.

Among them are companies that were once giant hits for SoftBank. DoorDash Inc.

and South Korean electronic retailer Coupang Inc.,

the two largest publicly traded holdings in the Vision Fund, both have fallen more than 40% in the past six weeks.

Overall, SoftBank said the Vision Fund earned just $ 3.1 billion out of the $ 45.6 billion it invested in its public companies as of the stock market close on Wednesday, little profit after five years of growing Nasdaq almost twice.

The difficult year was the second in a decade and a half when Mr Son was on the defensive when he apologized to investors in 2019 after a disastrous investment in WeWork office space Inc.

and other companies with large losses.

“We will be much more careful if we invest new money,” he said in a statement on SoftBank on Thursday, repeating his remarks almost three years ago.

Mr. Son proved the results to investors with a slide deck made in his simplistic – and somewhat sensational – style. One slide, set against a dark background with rising smoke, is written “The World in Chaos.”

He devoted most of the presentation to reassuring shareholders concerned about SoftBank’s debt levels, telling them he was carefully managing debt and cash.

In recent months, the company has borrowed nearly $ 6 billion from a startup investment in Vision Fund 2 – an unusual move for a venture fund given the high risks – and raised extra money through financial instruments tied to its nearly 25% stake in China. e-commerce giant Alibaba Group Holding.

Shares of SoftBank fell 8% on Thursday in Tokyo trading, which ended before the announcement of results. Thursday’s close of 4,491 yen was less than twice less than a year ago.

Another headache for Mr. Son is the hand-spinning operation called SB Northstar, which was launched in 2020 to invest in major public technology stocks. SoftBank said Thursday that Northstar has lost a total of nearly $ 6 billion since its inception, and Mr Son said the fund had largely ceased operations.

The CEO has contributed part of Northstar’s capital and will personally receive more than $ 2 billion, SoftBank said.

The fate of SoftBank is no longer linked so closely to Alibaba, which was the source of funding for other investments.

Back in September 2020, Alibaba SoftBank’s share accounted for more than half of its total asset value. As of March 31, almost a quarter of SoftBank’s stake in Alibaba was just 22% of net asset value. This makes SoftBank harder to borrow under this stake.

Mr Son said he would focus on designing Arm-owned Arm chips as a way to make money without spending more money. He said he expects demand for chips to continue to grow. He also confirmed that Arm’s operation in China had returned to normal after a dispute with the former CEO, who at one point left the operation in China without the corporate seal needed to run the business.

In February, SoftBank said it plans to make a public offering of Arm shares by March 2023 following a deal to sell the Nvidia block. Corp.

collapsed. Mr Son said the offer could be postponed for three to six months if the market situation deteriorates.

“We put on an umbrella when it rains,” Mr. Son said. “We have to think flexibly, depending on the situation. But now is the time to strengthen our defense. “

Write Megumi Fudikawa at megumi.fujikawa@wsj.com