The Tokyo-based multinational conglomerate, SoftBank, announced today that it expects to book a $12.5 billion operating loss by the end of its fiscal year ending in March 2020, as a result of a “deterioration in the current market environment”.
The company led by famous Japanese tech investor, Masayoshi Son, reported that this negative result was primarily caused by a $16.7 investment loss coming from the group’s massive $100 billion Vision Fund, which is engaged in high-profile startup investments including Uber and WeWork.
This performance marks a historic landmark for SoftBank, as it is the first time the company reports an annual operating loss. Analysts were already expecting a big drop in profitability resulting from the fund’s bad bets , including its investment on satellite operator OneWeb, which recently filed from Chapter 11 bankruptcy, causing the company a $6.9 billion net loss.
Shares of SoftBank in the Japanese stock market ended the day trading at 4,200 yen ($39), losing 3.38% as a result of the news while in the US market the company’s stock was losing 5% in morning trading.
SoftBank Group Corp. is the second-largest publicly traded company in Japan, specializing in telecommunications and technology. The company was founded in 1981 by 24-year old Masayoshi Son and it expanded its operations to become the 36th largest company in the world. In 2017, SoftBank launched its Vision Fund, a massive $100 billion investment fund mostly backed by Saudi Arabia that specializes in innovative companies and promising startups around the world.
The portfolio of companies that the Vision Fund has invested in includes more than 125 businesses across the globe including big names such as Uber, DashDoor, WeWork, and the recently-merged US telecom operator Sprint.
The company has recently been going through some turbulence, as its Vision Fund is significantly exposed to losses from early-stage businesses such as Uber, whose IPO resulted in a valuation 50% lower than expected, and WeWork, a co-working startup that generated a $4.6 billion loss for SoftBank as reported in November 2019.
In this regard, Son commented only 2 months ago that while the market “is still skeptical of us… that tide is turning” and he instructed investors to ignore short-term fluctuations in the value of the company’s investments by stating that the fund focuses on long-term bets.
Meanwhile, the company has accumulated a net debt of $55 billion and as much as $180 billion in total liabilities. SoftBanks i actively seeking to sell at least $41 billion in assets to reduce this burden and potentially buy back shares.