Japanese Giant Lost $32 Billion

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–FILE–Masayoshi Son, Chairman and CEO of SoftBank Corp., speaks during the First World Internet Conference, also known as Wuzhen Summit, in Wuzhen, an ancient town in Tongxiang city, east China’s Zhejiang province, 19 November 2014. SoftBank and Primavera Capital are in talks to invest in Bytedance, the six-year-old startup behind news app Toutiao and other popular Chinese entertainment apps, which is raising money ahead of a possible initial public offering next year. The new round of financing could value Bytedance at as much as $75 billion, according to people familiar with the discussions, making it one of the most valuable venture-backed startups in the world. It’s in talks to raise around $1.5 billion in fresh equity investments, with $1.5 billion in bonds raised earlier from previous investors converting into equity as part of the transaction. The talks are still ongoing and a deal may not be signed.

The Japanese SoftBank’s investment division, Vision Fund, reported losses for around $32 billion during its last fiscal year.

Despite the defensive strategies adopted, the Japanese giant did not manage to recover enough liquidity. But now investors are waiting for the Arm IPO.

SoftBank: the Japanese giant heavily exposed to tech stocks

Founded in 1981 as a telecommunications company in Tokyo, SoftBank has expanded until it became one of the top investment companies, especially thanks to its investment division, Vision Fund.

Since its beginnings, Masayoshi Son has served as the CEO of the company – and he is also its founder.

Heavily exposed to tech companies, the investment funds reported record losses amounting to 4.3 trillion Japanese yen – around 32 billion US dollars.

Losses recorded pertain to the fiscal year closed on March 31.

During the same period of 2022, the company reported losses for 2.55 trillion yen, as reported by CNBC.

SoftBank’s investment division experienced significant decline

Rajeev Misra, who is one of the most important allies of Son for what concerns the management of the company, and who has played a significant role in the investment fund management since its launch in 2017, abandoned that role in 2022, amidst the significant losses reported by the Japanese company.

In 2022, the company adopted the defensive mode, as affirmed by Son, and started to reorganise portfolios by limiting the exposure to some tech companies. One of these companies is Alibaba, which actually had made the fortune of Son, who was an early investor.

Vision Fund has investments in companies all over the world, but despite diversification, the focus on tech companies remains.

After the success experienced by tech stocks right after the breakout of the pandemic, the industry is one of the most affected by rising interest rates and the banking crisis.

The recovery of tech stocks did not help SoftBank recover losses.

The “defense” mood

Even if the defensive approach adopted by the company seemed to work during the last quarter (from January to March), the general condition of the tech sector also affected the Japanese fund.

Nasdaq 100 proved that: the index, heavily focused on tech companies, lost 11% during the same fiscal year for which SoftBank reported the record losses.

Starting in 2022, SoftBank started decreasing its exposure to some companies to recover liquidity.

The investment fund started investing in Uber in 2018, and its second round of investments in 2019 led SoftBank to become the largest Uber’s shareholder.

During 2022, the Japanese investment fund started selling its shares. As reported by CNBC, the difference between the selling price and the buying price was positive, allowing the investment fund to exit with profits, but Son was not specific about the amount sold.

Other companies involved in the defensive strategy adopted by SoftBank were Opendoor (real estate firm), Beike (the Chinese real estate and brokerage company), Guardant (healthcare company).

If all these sales were profitable, there are also other sales that reported losses: SenseTime (the China-based artificial intelligence company), and GoTo (the Indonesian ride-hailing company).

SoftBank also sold Alibaba shares – but via derivative contracts.

What about future plans and events?

SoftBank’s investment division should now recover more liquidity for new investments.

This perspective made investors focus on the plans of Arm.

Arm is a UK-based semiconductor firm owned by SoftBank, which acquired the firm in 2016.

Arm will go public: the Initial Public Offering – IPO – of Arm is interesting also because of a possible change of exchange. Arm, in fact, wants to list in the United States, and not in the United Kingdom – it has already filed for listing.

The firm seems financially healthy: sales increased by over 27% during the past fiscal year, as well as pre-tax income – that increased by 18%.

The semiconductor market is closely watched by traders and investors because of the AI boom.

This might represent a good occasion for SoftBank to recover more liquidity and get additional exposure to a tech sector that is experiencing significant growth.

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