TOKYO (REUTERS, NYTIMES) - Japan's SoftBank Group on Monday (May 18) reported an annual 1.9 trillion yen (S$25.3 billion) operating loss at its gargantuan Vision Fund, as its tech bets slid below cost, pushing the group to its largest-ever loss.
The fund's US$75 billion (S$107 billion) investment in 88 start-ups were worth US$69.6 billion at the end of March after booking losses of almost US$10 billion at office space sharing firm WeWork and ride hailing firm Uber Technologies alone.
The disastrous result left the broader group falling to a 1.4 trillion yen loss in the year ended March.
Chief executive Masayoshi Son's strategy of fronting huge sums of cash and pushing for breakneck growth had already delivered two consecutive quarters of loss at the US$100 billion fund before being upended by the coronavirus outbreak.
SoftBank booked a US$7.5 billion loss on other tech investments, which it attributed primarily to the economic shock caused by the virus. The outbreak has exacerbated underlying problems at many of its bets on unproven start-ups.
The firm provided scant detail on which companies saw writedowns but offered a sector breakdown showing the fund's bets on construction and real estate were worth less than half of cost price, with flagship transportation investments also underwater.
The heavily indebted SoftBank has leveraged its bets to supply further funds to its investing juggernaut - a strategy that is coming under growing strain as valuations tumble, with losses larger than the group's revised estimate from just last month.
SoftBank-backed satellite operator OneWeb filed for bankruptcy in late March, adding to an impairment loss for investments held outside the Vision Fund that also includes part of the stake in WeWork.
The group pointed to further pain to come, saying "uncertainty in its investment business will remain over the next fiscal year" if the pandemic continues.
The turmoil has given leverage to US activist shareholder Elliott Management, which in addition to recommending share buybacks is pushing for greater transparency and oversight.
The demands echo critics who argue SoftBank is dominated by Son and offers little transparency on how the valuations that drive its profit are reached.
The group has pledged the sale or monetisation of US$41 billion in assets, in part to finance a 2.5 trillion yen buyback to prop up its share price. By the end of April it had spent 250 billion yen on share purchases.
At the same time, the company is loosening ties with the largest asset in its portfolio and a likely target for asset sales - its stake in Alibaba Group Holding - with the Chinese e-commerce major's co-founder, Jack Ma, departing the SoftBank board.
In a statement on Monday, SoftBank did not mention the reason for Ma's departure. Last year, Ma retired as executive chairman from Alibaba, saying that he would pull back from his business endeavours to focus on philanthropy.
Ma's departure from the company's board follows the exit late last year of Tadashi Yanai, the founder and president of Japanese clothing retailer Uniqlo. Yanai was a long-time ally of Masayoshi Son and seen as a moderating influence on SoftBank's exuberant founder.