The Japanese conglomerate SoftBank reported on Monday its biggest quarterly loss, $23.4 billion, fueled by the poor performance of its flagship tech investments and a weak yen.
It was him second quarter in a row of huge losses for the company, which has been reeling from broad-based weakness in global equities, leading to paper losses in the company’s portfolio of publicly traded tech giants, as well as downgrades in its holdings by hundreds of of non-listed companies.
The losses are the biggest in decades for the company’s eccentric founder, Masayoshi Son, who staked his future on huge, often undisciplined investments in tech companies he believed would transform entire industries, from grocery shopping to construction, to as the world transitioned to a digital world. years.
In comments after the earnings announcement, a chastened Son reflected on the lessons he had learned over the past year and said he would scale back his gargantuan ambitions for the company.
“We’ve been making big changes, but we couldn’t hit the mark,” Mr. Son said, adding that the company is now making fewer big bets and instead choosing smaller, more strategic investments with potential paydays. more modest.
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 their hunches.
His somber tone was a stark contrast to earlier moments of exuberance, such as when he recited a 300-year vision for the company.
Mr. Son has long reveled in risk-taking and big numbers. In 2017, SoftBank’s technology investment arm, Vision Fund, became the world’s largest such company, weighing in at $100 billion, much of it raised from Saudi Arabia’s public investment fund. Last year, when stock prices soared, he announced the record profit of more than $46 billion for the year ending in March, an achievement lifted by rising tech valuations as investors piled into companies providing services to people stuck at home during the pandemic.
But Mr. Son is also known for his drastic reversals of fortune. In the early 2000s, he briefly became one of the world’s richest men before losing nearly all of his fortune when the internet bubble burst.
The last two years have sent Mr. Son on a new roller coaster. Initially, the pandemic prompted SoftBank investments into big-name tech companies on the ground, sent them flying, and then it crashed them again. Companies like Coupanga South Korean e-commerce company, and door boarda food delivery app, had high-flying initial offerings, but has since declined sharply.
In addition, Chinese campaign in its technology sector has hit the value of SoftBank’s large portfolio of Chinese companies. In response, SoftBank quietly sold a large portion of its Alibaba holdings. An initial $20 million investment in the Chinese e-commerce giant was so successful that it once accounted for nearly 60 percent of SoftBank’s net asset value.
At its highest point last year, Mr. Son’s Vision Funds, the original Vision Fund; the second, smaller Vision Fund 2; and a Latin American fund, 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 the gains they had made throughout their history. Since March, the value of Vision Funds’ publicly traded shares has fallen 31 percent, compared to 22 percent for the Nasdaq as a whole, Son said.
SoftBank has also been affected by the falling value of the yen over the past year, which has raised the cost of the company’s dollar-denominated debt.
With the recent losses and new investment direction, the company will likely need to make layoffs, Son said, adding that “the number of Vision Fund employees may need to be drastically reduced.”
Son said the company was also considering selling asset manager Fortress Investment Group, which it bought for more than $3 billion in 2017.
After the earnings report, SoftBank Announced that it would buy back up to 400 billion yen ($3 billion) of its shares. The announcement followed a decision in November to buy back 1 trillion yen of shares.
SoftBank shares rose slightly on Monday in Tokyo. They are down more than 16 percent in the last 12 months, about the same as the Nasdaq index.