Japan’s Softbank Group Corp yesterday suffered its first quarterly net loss in 18 months owing to a plunge in its Vision Fund investments, including embattled Chinese e-commerce giant Alibaba Group Holding Ltd (阿里巴巴) and ride-hailing firm Didi Chuxing (滴滴出行).
The telecoms firm, which is now an investment giant, posted a net loss of ¥397.9 billion (US$3.5 billion) from July to September, the first since January to March last year, dragging first-half net profit down more than 80 percent on-year.
Softbank Group has poured money into some of the tech world’s biggest names and hottest new ventures, from artificial intelligence to biotech, through its US$100 billion Vision Fund.
Photo: Bloomberg
However, those investments have proved tumultuous, as CEO Masayoshi Son said yesterday that the firm was “in the middle of a blizzard.”
Softbank said its loss on investments during the quarter amounted to ¥1.66 trillion, including those incurred by its Vision Fund operations.
“We’re not proud of that,” Son said of the first-half results. “Our most important indicator, the net asset value, has decreased by ¥6 trillion. Just in three months. This is a big deal.”
Son said the results could be boiled down to one factor: Alibaba.
Shares in Alibaba, Softbank’s largest investment, fell more than 30 percent in the three months ending September, Bloomberg said, as authorities in China are cracking down on tech firms to tighten their grip on the economy.
The firm also took a hit from DiDi Global Inc (滴滴), parent of Didi Chuxing, which has also been in Beijing’s crosshairs.
DiDi’s share price “is dropping under the influence of the Chinese government’s regulations. Most of the other Chinese shares we own are also tumbling,” Son said.
In total, the firm said its loss on investments during the quarter amounted to ¥1.66 trillion, including a loss of ¥321 billion for DiDi Global, and ¥1.21 trillion from its stake in South Korean e-commerce firm Coupang Corp.
Softbank’s investments in volatile tech firms and start-ups have made for unpredictable earnings.
In 2019 through last year, it reported a record net loss of ¥961.6 billion as the start of the pandemic compounded woes caused by its investment in troubled office-sharing start-up WeWork.
It then reported Japan’s biggest ever annual net profit in 2020 to this year, driven by tech-share rallies as people moved their lives online during the COVID-19 pandemic.
Redex Research analyst Kirk Boodry warned last month of a “tough” earnings report for Softbank.
“China exposure is a major driver whilst Coupang continues to spiral down from the heady highs in March,” he said.
Softbank does not usually issue an annual forecast, as its business model is dependent on often volatile stock market activity.
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