The Japanese conglomerate SoftBank reported Monday its largest quarterly loss, $23.4 billion, driven by poor performance of its flagship tech investments and a weak yen.
It was the second straight quarter of enormous losses for the company, which has been staggered by broad weakness in global stocks, causing paper losses in the company’s portfolio of publicly traded tech giants, as well as markdowns on its holdings in hundreds of unlisted companies.
The losses are the biggest in decades for the company’s eccentric founder, Masayoshi Son, who staked its future on huge, often undisciplined, investments in tech companies that he believed would transform entire industries — from grocery shopping to construction — as the world transitioned into a digital age.
In comments following the earnings announcement, a chastened Son reflected on the lessons he had learned over the past year, saying that he would scale back his mammoth ambitions for the company.
“We’ve been making big swings but couldn’t hit the ball,” Son said, adding that the company was now making fewer big gambles, instead choosing to make smaller, more strategic investments with more modest potential paydays.
To that end, Son said, the company has systematized its investment decisions and put more power in the hands of experts, rather than relying on his hunches.
His somber tone was a stark contrast to past moments of exuberance, such as when he declaimed a 300-year vision for the company.
Son has long reveled in risk taking and big numbers. In 2017, SoftBank’s technology investment arm, the Vision Fund, became the world’s largest such enterprise, weighing in at $100 billion, much of it raised from Saudi Arabia’s public investment fund. Last year, as stock prices skyrocketed, he heralded the company’s record-setting profit of over $46 billion for the year ended in March, an achievement that was elevated by soaring tech valuations as investors piled into companies that serviced people stuck at home during the pandemic.
But Son is also known for dramatic reversals of fortune. In the early 2000s he briefly became one of the world’s richest men before losing almost his entire fortune as the internet bubble burst.
The past two years have sent Son on a new roller coaster ride. The pandemic initially drove SoftBank’s investments in big-name tech companies into the ground, sent them soaring, and then crashed them again. Companies such as Coupang, a Korean e-commerce business, and DoorDash, a food-delivery app, had highflying initial offerings, but have since dropped sharply.
Additionally, China’s crackdown on its tech sector has pummeled the value of SoftBank’s large portfolio of Chinese companies. In response, SoftBank has quietly sold off a large share of its holdings in Alibaba. An early investment of $20 million in the Chinese e-commerce giant was so successful that it once accounted for almost 60 percent of SoftBank’s net asset value.
At its high point last year, Son’s Vision Funds — the original Vision Fund, the second, smaller Vision Fund 2, and a Latin American fund that was recently added to the portfolio — had grown by more than 7 trillion yen ($52 billion). But by the end of June, the funds had given up almost all of the gains they had made over their entire history. Since March, the value of the Vision Funds’ publicly traded stocks fell 31 percent, compared with 22 percent for the Nasdaq overall, Son said.
SoftBank has also been hurt by the falling value of the yen over the past year, which has driven up the cost of the company’s dollar-denominated debt.
With recent losses and the new investment direction the company will likely need to make layoffs, Son said, adding that “Vision Fund head counts may need to be reduced dramatically.”
Son said the company was also considering selling the asset manager Fortress Investment Group, which it purchased for over $3 billion in 2017.
Following the earnings report, SoftBank announced it would buy back up to 400 billion yen ($3 billion) of its shares. The announcement follows a decision in November to buy back 1 trillion yen of stock. SoftBank’s shares rose slightly Monday in Tokyo. They are down more than 16 percent over the past 12 months, roughly the same as the Nasdaq index.