SoftBank posts ¥1.36 trillion loss from underperforming Vision Fund investments

In the three months to March alone, the SoftBank Vision Fund posted a ¥1 trillion loss.

SoftBank has officially posted an operating loss of ¥1.36 trillion for the fiscal year ended March 31, marking its first annual loss in 15 years.

It also reported net income collapsed to a loss of more than ¥961 billion, down from the ¥1.4 trillion net profit recorded the year prior.

This is despite net sales increasing by 1.5% compared to the year prior to ¥6.2 trillion. Taxwise, SoftBank paid almost ¥798 billion in taxes for the fiscal year. 

At SoftBank's full-year earnings presentation, CEO and chairman Masayoshi Son opened with allusions to the Great Depression when discussing the conglomerate's poor performance. 

"Back in 1929, the Great Depression caused stock prices to go down one-tenth. The Dow Jones Industrial average took 25 years to recover. It was a big damage to the world and this time the novel coronavirus, I would say, has caused a similar impact worldwide," Son said.

In the three months to March alone, the SoftBank Vision Fund posted a ¥1 trillion loss, which the company attributed to the coronavirus pandemic. It also lost ¥720.8 billion from loan commitments and financial guarantees made to WeWork.

For the full year, the Vision Fund experienced a ¥1.93 trillion loss. Compared to the year prior, the fund posted a ¥1.26 trillion profit.

The Vision Fund's consumer investments, real estate investments, and transportation and logistics investments -- which include Uber, Didi Chuxing, and Grab -- were hit particularly hard. The fair value of these three segments fell by $3.3 billion, $3.3 billion, and $2.8 billion in the three months to March, respectively. 

Due to these underperforming investments, the Vision Fund's value dropped by $17.2 billion year on year.

"The stagnation in economic activity, restrictions on social outings, and stock market disruptions in various countries due to the outbreak of COVID-19, have had, and are expected to continue to have, a significant impact on the business activities and fair value measurement of the portfolio companies of SoftBank Vision Fund," SoftBank said.

With the SoftBank Vision Fund underperforming, Son said the development of Vision Fund 2 has been stalled due to lack of funding.

"The performance of SoftBank Vision Fund 1 is not that great, therefore we decided to invest our own money. As the performance is not very good, of course, the money for SoftBank Vision Fund 2 cannot be asked from other people. It's not popular right now," Son said.

SoftBank's Arm business also suffered as a result of the coronavirus pandemic. For the full year, Arm's net sales increased by 2% to ¥206 billion but it still posted a ¥42 billion net loss. 

Technology licensing chipped in $582 million for net sales, technology royalties provided $1,08 billion, while software and services provided $235 million, respectively. Arm also signed 34 processor licences in the fourth quarter, including six licences for technologies that Arm has not yet announced.

It noted that despite improvements to its net sales and continued growth, the company remained vulnerable to the US-China trade dispute, sanctions against Huawei, and impacts from the outbreak of COVID-19.

"In the light of the COVID19 outbreak, the shipment of consumer electronic devices may decrease, leading to lower technology royalty revenue, and semiconductor companies that face reduced revenues may delay licensing decisions," SoftBank said in its results.

Meanwhile, SoftBank's telecommunication businesses remained steady, having reported last week that it posted net income of just over ¥506 billion for the fiscal year, a slight increase of 2.5% year on year.

Speaking to the impact of the merger between Sprint and T-Mobile that was finalised in April, Son said during the earnings presentation that SoftBank now has a nearly $30 billion stake in the new T-Mobile. When asked during the earnings presentation whether SoftBank would sell its stake in T-Mobile, Son said the company would consider various financing options before making a decision.

Prior to the release of SoftBank's results, the company announced that Jack Ma, co-founder and former chairman of Alibaba, resigned from its board

In a separate announcement [PDF] on the same day, SoftBank said it would also spend ¥500 billion to repurchase its own shares as part of its ¥4.5 trillion ($41 billion) debt reduction scheme that was announced in March. At the time, SoftBank said it would already buy back up to ¥2 trillion worth of shares, in addition to a ¥500 billion share buyback it had announced earlier that month.

Previously, the SoftBank Vision Fund in Q3 reported operating losses of ¥225 billion, which almost completely wiped out the Japanese company's bottom line for that quarter.

With the COVID-19 outbreak still ongoing, SoftBank founder and CEO Son also said last month that he expected 15 companies in the Vision Fund to go bankrupt as the company tightens its financial belt.

RELATED COVERAGE