SoftBank Vision Fund posts record $9.8 billion loss in Q3

Depressed valuations in SoftBank's China portfolio amid a regulatory crackdown continued to drag on its performance. PHOTO: AFP

TOKYO (BLOOMBERG) - SoftBank Group reported a record loss at its Vision Fund unit as the value of public holdings like Coupang and Didi Global plunged.

The unit's loss for the third quarter ended Sept 30 was 825.1 billion yen (S$9.8 billion), SoftBank said in a statement on Monday (Nov 8).

It is the Vision Fund's worst performance ever, exceeding the 788.6 billion yen loss the business posted amid pandemic-driven write-downs. Overall, the company had a net loss of 397.9 billion yen in the period.

Mr Masayoshi Son's Vision Fund has been a volatile contributor of profit and loss since its creation in 2017. The first downturn started in 2019 with Uber Technology's disappointing public debut and the implosion of WeWork, followed by the impact of the coronavirus.

Then a global surge in technology shares boosted Vision Fund's profit to new records for three consecutive quarters in the last fiscal year, thanks to blockbuster listings by South Korean e-commerce giant Coupang, United States delivery firm DoorDash and Chinese online property platform KE Holdings. Now the plunging value of some of those companies and a tech sector crackdown by Chinese regulators have once again pushed the business into the red.

"If you look at the Vision Fund's performance so far this year, pretty much everything they brought to market so far has lost money since listing," Redex Research analyst Kirk Boodry said ahead of the earnings announcement.

"That is an incredibly poor track record. They have been behind a lot of overpriced IPOs (initial public offerings). It makes you wonder whether this whole cycle of investing, taking the companies public and then getting your money back is broken."

SoftBank's shares have slid about 24 per cent this year.

The unrealised loss on valuation of public companies totalled US$17.7 billion (S$23.9 billion) in the quarter across SoftBank's two Vision Funds. Coupang was responsible for US$6.7 billion of the loss. Two quarters earlier, the South Korean e-commerce leader marked Mr Son's best return since Alibaba Group Holding's listing when it contributed US$24.5 billion to Vision Fund's profit.

SoftBank's portfolio of Chinese start-ups was particularly hard-hit after the country's regulators launched an offensive against the tech sector. Didi, whose debut at the end of the previous quarter was one of the largest US offerings of the past decade, lost US$6.1 billion in the quarter and Uber-like trucking start-up Full Truck Alliance was down US$1.2 billion.

KE Holdings, which runs the Beike online property service, lost US$2.2 billion of value. The little-known Chinese start-up handed SoftBank an unrealised gain of US$5.1 billion when it went public in August last year, pushing up Vision Fund profit to a new record in that quarter. Even though the company has not been directly targeted by regulators, its stock is down more than 70 per cent from its peak and is trading below the IPO price.

The losses in the public portfolio were offset by 455.9 billion yen (S$5.4 billion) of realised gains as SoftBank cashed in on some of its most successful investments. SoftBank sold US$2.2 billion worth of DoorDash stock in August and raised about US$1.69 billion from a sale of Coupang stock in September.

Mr Son has also considerably scaled down his controversial programme of trading stocks and options, liquidating his entire stakes in, Taiwan Semiconductor Manufacturing Co and PayPal Holdings. SoftBank held a total of US$5 billion of "highly liquid listed stocks", down from US$13.6 billion at the end of the previous quarter.

"For the next few quarters, we don't have very much to look forward to in the Vision Fund business," Mr Boodry said. "Sure, there are some upcoming IPOs they can point to, but it's just drowned out by all the negative noise. And none of them are going to be as big as Didi."

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