- SoftBank was in a valuation bubble – son
- No sacred areas for cost cutting – my son
- SoftBank has parted ways with Uber
- Announced 400 billion yen share buyback
TOKYO, Aug 8 (Portal) – SoftBank Group Corp (9984.T) plans to cut staff at its flagship investment arm Vision Fund, CEO Masayoshi Son said on Monday after a collapse in the value of his portfolio pushed his conglomerate down to one record quarterly loss.
Vision Fund, which turned the world of venture capital upside down with splashy bets on startups like Uber and Didi, posted a loss of $23.1 billion in the April-June quarter.
“The world is in great confusion,” Son said at an annual press conference.
The results cap a turbulent six months for the Vision Fund, which posted a record quarterly loss of $26.2 billion in May after SoftBank was gripped by rising interest rates and political instability that hit markets worldwide.
Son has already radically scaled back investment activity. The Vision Fund arm approved just $600 million in new investments in the first quarter, compared with $20.6 billion in the same period last year.
On Monday, the billionaire vowed to go further: to limit the second fund to managing its current investment portfolio while also planning staff reductions at Vision Fund and cost-cutting across the group.
“We need to lower the cost of no sacred areas,” Son said.
Son had already suffered a string of high-profile setbacks after the first Vision Fund’s big bets in late-stage startups like office-sharing company WeWork faltered, prompting him to tighten investment controls at the second fund.
However, the billionaire said Vision Fund 2, which has taken smaller stakes in a larger number of companies, has invested at hefty prices.
“We were in a kind of valuation bubble,” he said.
The second Vision Fund’s portfolio of 269 companies that cost $48.2 billion to acquire was worth just $37.2 billion at the end of June.
The SoftBank Group Corp logo is shown at the SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017. Portal/Issei Kato/File Photo
“If we had been more selective and invested better, we would not have suffered this heavy blow,” Son said.
Publicly traded investments that fell during the quarter included warehouse robotics company AutoStore Holdings Ltd (AUTO.OL) and artificial intelligence company SenseTime Group Inc (0020.HK).
SoftBank has written down the value of the unlisted assets of its two Vision Funds by 1.14 trillion yen ($8.45 billion).
Plunging IPO volumes and market skepticism about money-losing startups have squeezed a key source of capital for SoftBank, which hopes to list chip designer Arm after a failed sale to Nvidia.
To raise money, SoftBank exited companies like Uber Technologies (UBER.N) and home-selling platform Opendoor Technologies (OPEN.O) for combined profits of $5.6 billion.
SoftBank sold Uber at an average share price of $41.47 compared to Friday’s close of $32.01.
The group has used more than two-thirds of the capital in a 1 trillion yen buyback program launched last November to prop up its shares, which have fallen about half from their highs in March last year.
SoftBank on Monday announced an additional share buyback program worth up to 400 billion yen that is expected to run through August next year. Shares closed 0.7% higher before earnings were released, in line with the benchmark Nikkei 225 (.N225).
The conglomerate isn’t the only investor with heavy exposure to the high-growth stocks that are now being shunned by investors.
Hedge fund Tiger Global, which competes in deals with “unicorn hunter” Son, saw its flagship fund fall 50% in the first half of the year after underestimating the impact of rising inflation on markets. Continue reading
($1 = 134.9000 yen)
reporting by Sam Nussey; Edited by Edmund Klamann, David Dolan, Kirsten Donovan
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