SoftBank’s quarterly profit almost crumbles as the Japanese conglomerate reports a second quarter of loss from a list of ill-judged bets on start-ups.
The Vision Fund
The $100 billion Vision Fund has made Masayoshi Son become the biggest investor in technology. However, the funds have lost significant amount of money since the meltdown at WeWork. Consequently, Son announced there has been pressure to scale back on the second Vision Fund which will only be invested using SoftBank’s own capital.
According to Reuters, the company’s profit was 2.6 billion yen ($24 million) in October and December quarters against the 438 billion yen the previous year. The Vision Fund made a loss of 225 billion yen ($2.05 billion) for the quarter and generated 176 billion in profit a year earlier in the same period.
For several months, Son has argued that SoftBank’s shares were being undervalued, a point shared by hedge fund Elliot Management, a prominent shareholder. Elliot declared that Vision Fund’s accounts were less than 15 per cent of SoftBank’s overall value.
SoftBank still owns a 25% stake in China’s Alibaba which has a market value of $603 billion (2020). The value which surpasses SoftBank’s $110 billion market capitalisation.
The Big Win?
Furthermore, the company scored a win after Sprint SoftBank (owned by American mobile carrier) won approval to merge with rival T-Mobile US. As a result, SoftBank’s shares have increased, despite the 99 per cent drop in third-quarter profits.
Likewise, shares in Vision Funded portfolio companies such as Uber and Slack have rinsed in the past weeks. According to Financial Times, SoftBank’s share price has climbed 25% since the start of 2020.
SoftBank announces it will introduce a new governance standard for its portfolio companies. The aim is to “enhance value creation and liquidity”. Furthermore, Elliot stated that the company considered establishing a committee to review the investment process at the Vision Fund.