SoftBank Vision Fund, the renowned Japanese investment giant, faced a staggering loss of $32 billion in the financial year ending March. This marks a significant increase of 70% compared to the previous year when losses amounted to $19 billion in the Vision Fund unit. SoftBank’s extensive portfolio of private and public tech companies has been hit hard by valuation corrections, compounded by a weakening global economy.
Notably, SoftBank reported unrealized losses of $1.6 billion each in SenseTime Group and GoTo, along with nearly $800 million in DoorDash. As a result, the fair value of SoftBank’s portfolio was marked down by $2.3 billion to $138 billion in the last quarter.
SoftBank’s CFO, Yoshimitsu Goto, had previously announced that the company was entering “defense mode” and preparing for various scenarios. SoftBank predicts that the market could show signs of recovery either linearly this year, by the second half of this year, or in the worst-case scenario, not until early 2024.
The challenging situation at SoftBank Vision Fund poses difficulties for its portfolio startups, many of which are already operating at a loss. SoftBank has been a high-conviction growth investor, leading significant financing rounds for its portfolio companies. However, the recent losses have prompted a shift in investment strategy, with SoftBank becoming more selective and cautious in deploying new capital. In the past 12 months, SoftBank closed 25 deals totaling $400 million, a notable decrease compared to its peak in 2018.
SoftBank aims to reassure investors about the stability of its existing portfolio, stating that 94% of its companies across all funds currently have a cash runway of over 12 months. Nevertheless, the recent decline in public stock markets, along with geopolitical events such as Russia’s invasion of Ukraine and the Federal Reserve increasing interest rates, has exposed many tech companies to drops in business and impacted their earnings forecasts. Consequently, valuations have plummeted, leading to investors scrambling to mitigate losses.
Despite the challenging landscape, SoftBank Group remains optimistic about the progress of the initial public offering (IPO) of Arm, a potential milestone that could generate substantial returns for the conglomerate. The proposed $40 billion sale of Arm to Nvidia, announced in 2020, was thwarted by regulators. However, an IPO could still yield a market cap between $30 billion and $80 billion. It’s worth noting that the IPO window has been closed for some time, and the performance of tech stocks has been lackluster.
SoftBank Group also emphasized that 94% of its startup holdings maintain a financial runway of at least 12 months, indicating their ability to weather the storm amid uncertain market conditions.
