Tokyo One of the world’s largest tech investors has struggled to avert a record loss. The Japanese company Softbank, which maintains two billion-dollar financing funds, announced a minus of the equivalent of 6.6 billion euros for the year on Wednesday. Compared to the previous year, the loss has decreased by 43 percent.
The book loss for the Softbank Vision Fund 1 and 2, which is internationally invested in around 400 top start-ups, totaled 5.3 trillion yen – 36 billion euros. The Japanese were able to make up for this, at least to a large extent, by selling blocks of shares. Softbank sold large packages to the Chinese online trading giant Alibaba and the Telekom subsidiary T-Mobile US.
The investor has been in defense mode since August 2022, the second time since the outbreak of the corona pandemic. At the time, Softbank founder Masayoshi Son announced that he would drastically reduce investments, lay off staff – and sell existing shares in order to collect cash to compensate for the threatened loss in value of start-ups and companies in the portfolio.
CFO Yoshimitsu Goto has now taken over the operational business. At the end of last year, Son handed over the management to his confidant, and the presentation of the balance sheet is now entirely his responsibility. Goto also speaks of a “total defensive” – but also has the difficult market environment in mind.
The financing and valuation of start-ups in particular suffered from rising interest rates, the Ukraine war and the growing tensions between China and the USA. This also hit the biggest investors, even Warren Buffett’s Berkshire Hathaway posted a loss of $22 billion in 2022.
The farewell to China’s Alibaba is intended to herald Softbank’s new beginning
Goto’s execution of the defense strategy also hit one of Softbank’s most prominent investments: Alibaba. Since Son invested 20 million dollars in the then unknown start-up in 2000, the online retailer has developed into a global corporation – and thus Softbank’s financial lifeline for a long time. Whenever Son needed money, he sold shares.
But now Softbank has sold almost all remaining positions or silvered them through futures transactions, Goto explained. As a result, Alibaba’s share of the value of the Japanese fell from 43 to five percent within two years (March 2023).
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These sales alone generated 31 billion euros in the past financial year. Another $6.5 billion came from the sale of stocks from Vision Fund start-ups that were already listed, and $2.4 billion from the sale of T-Mobile shares.
Softbank used the money to reduce the debt by 15 billion euros. This reduced the debt ratio compared to Softbank’s net worth from 20.4 to eleven percent. In addition, the company bought back shares worth almost ten billion euros in order to become more attractive to investors. Softbank increased its cash holdings by 72 percent to 34.6 billion euros.
Softbank is preparing for new investments in artificial intelligence
Goto now indicated an end to the “total defensive”. Things are set to continue this year: Softbank wants to list the British chip designer ARM, which the company took over in 2016. Almost all chips in mobile devices and a rapidly growing proportion of computer chips are based on ARM’s design, including the new chips from the US company Apple.
Applications of artificial intelligence (AI) also often use the know-how of the British. Softbank is therefore hoping for eight billion dollars from ARM’s IPO. Overall, Goto estimated the value of potential IPOs for portfolio companies at $37 billion.
CFO Yoshimitsu Goto has now taken over the operational business. At the end of last year, Son handed over the management to his confidant.
(Photo: Reuters)
The “Financial Times” also reported this week that the Japanese will also sell the American Fortress Investment Group for three billion dollars to the Mubadala, the sovereign wealth fund of the United Arab Emirates. At the same time, there are signs of a turnaround in the stock market.
“We are striving for a balance between defense and attack,” Goto described the new strategy. Last year, only a tenth of the previous sums were invested and many opportunities were missed out of caution. This year, the company wants to take advantage of opportunities, especially when it comes to AI.
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The boom of ChatGPT from the US start-up OpenAI would excite Softbanks founder Son, Goto said. He has been talking about an impending AI revolution for years and has recently focused his investments on companies that use AI.
Goto did not comment on whether Softbank had also spoken to ChatGPT developer OpenAI. However, the group is reviewing new investments in this area, said Navneet Govil, who heads Softbank’s vision fund. “If we find investment opportunities that we find very attractive, we will invest.”
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