SoftBank Vision Fund records $18 billion operating loss, portfolio slides underwater

TOKYO (Reuters) – Japan’s SoftBank Group Corp reported a stunning $18 billion loss at its giant Vision Fund, pushing Masayoshi Son’s conglomerate to a record loss and highlighting the deepening crisis at its portfolio companies from the global downturn.

The disastrous 1.9 trillion yen ($18 billion) operating shortfall at the Saudi-backed Vision Fund, including losses of almost $10 billion at office-sharing firm WeWork and ride- hailing app Uber Technologies Inc alone, left SoftBank with its worst ever annual loss of 1.4 trillion yen.

Son, who is under pressure from U.S. activist hedge fund Elliott Management to increase share buybacks and governance, said SoftBank would raise 1.25 trillion yen for buybacks using its stake in China’s Alibaba Group.

“The coronavirus is an unprecedented crisis,” a notably downbeat Son told an earnings presentation, comparing it to the Great Depression.

It was a far cry from his characteristic ebullience.

The Vision Fund’s $75 billion investment in 88 startups were worth $69.6 billion at the end of March. The $100 billion fund had already delivered two consecutive quarters of losses before being upended by the coronavirus outbreak.

SoftBank booked a $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 startups.

It provided scant detail on which companies saw writedowns but offered a sector breakdown showing investments in construction and real estate were worth less than half of cost price, with flagship transportation investments also underwater.

SoftBank has leveraged its investments to supply further funding for other investments – a strategy that has coming under 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 U.S. shareholder Elliott, 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 $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 Alibaba Group, the largest asset in its portfolio, with the Chinese e-commerce major’s co-founder, Jack Ma, departing the SoftBank board.

($1 = 107.1800 yen)