Japan’s Softbank Group Corp yesterday reported a record quarterly net loss last quarter, after central bank interest rate hikes caused tech shares to tank.
The telecoms firm that has turned into an investment behemoth posted a net loss of ￥3.16 trillion (US$23,41 billion), nose-diving from a net profit of ￥761.5 billion in the same April-June period the previous year.
A weaker yen and a “global downward trend in share prices due to growing concerns over economic recession driven by inflation and rising interest rates” contributed to the slump, it said.
Photo: AP
The company’s Vision Fund segment posted a loss of ￥2.33 trillion in the three months ending June 30, following a then-record ￥2.2 trillion loss in the previous quarter.
Softbank also reported an ￥820 billion foreign exchange loss because of the weaker yen.
Among portfolio companies that suffered large losses for the quarter were South Korean e-commerce giant Coupang Inc, Chinese artificial intelligence software maker SenseTime Group Inc (商湯科技) and US meal delivery platform DoorDash Inc, it said.
Softbank’s big stakes in global tech giants and volatile new ventures have made for unpredictable earnings, and it has lurched between record highs and lows in recent years.
In May, it reported its worst-ever full-year net loss — and a then-record quarterly loss for Q4 — after a bruising fiscal year in which its assets were hit by a US tech share rout and a regulatory crackdown in China.
That came after logging Japan’s biggest-ever annual net profit in the 2020-2021 fiscal year, after people moved their lives online during the COVID-19 pandemic, sending tech stocks soaring.
And in 2019-2020, Softbank Group reported a then-record annual net loss of ￥961.6 billion, as the emergence of COVID-19 compounded woes caused by its investment in troubled office-sharing start-up WeWork Inc.
Toyo Securities Co senior analyst Hideki Yasuda said that the company “cannot help” big losses, “because the market is down.”
The company “faces a very tough situation in the immediate term,” Yasuda said before the earnings announcement.
“They have to wait for the market to rebound. You have to look at the company through the lens of long-term investment,” he said. “It may experience one or two bad years, but over a decade or more, the world economy will keep growing and it could grow further.”
The US Federal Reserve and many other central banks have announced aggressive rate increases aimed at battling sky-high inflation linked to the Ukraine war and COVID-related supply chain woes.
However, going against the grain, the Bank of Japan has stuck to its long-held monetary easing policies because it sees recent price increases as temporary.
This has pushed Japan’s currency down to 24-year lows against the US dollar in recent months, driving down the yen value of Softbank’s investments.
Softbank is also grappling with the departure of a growing number of top executives, putting more responsibility on founder Masayoshi Son’s shoulders just as the outlook turns increasingly grim.
The company and Son are now trying to wait out a slump in chip-related stocks so that it can grab a return on its US$32 billion purchase of chip designer unit Arm Ltd through an initial public offering.
The Japanese billionaire has said he aims to make the offering the largest ever for a chip company.
Additional reporting by Bloomberg
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