By Cristian Bustos. Originally published at ValueWalk.
It has been a dire fiscal year for tech stocks, with the NASDAQ down by 27% in 2022. This is the stage for the crash of SoftBank Group Corp (TYO:9984)’s Vision Funds, which posted a record $27 billion loss in the year ended March, prompting CEO Masayoshi Son to take defense.
Disappointing Year
Upon the release of SoftBank’s fiscal year results, Son acknowledged the Japanese corporation would be more careful when choosing deals, be more strict when it came down to identifying investment opportunities, and focus on boosting returns from its portfolio firms.
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At an earnings presentation in Tokyo, CEO Masayoshi Son said: “We, SoftBank, should be taking defense.”
Son pointed to the chaos in the market provoked by soaring inflation, Russia’s invasion of Ukraine, and the effects of the Covid pandemic.
SoftBank’s portfolio includes publicly-traded companies such as ride-hailing startup Grab Holdings Ltd (NASDAQ:GRAB) and e-commerce firm Coupang Inc (NYSE:CPNG) —whose IPO’s were soundly successful last year.
However, amid the convoluted market, shares of both Grab and Coupang have dived by over 60% in 2022.
Both add to the biggest SoftBank disappointment, DiDi Global Inc – ADR (NYSE:DIDI), whose shares have plummeted 70% this year. The ride-hailing company was the subject of a vicious crackdown by Chinese regulators, following a blockbuster IPO in 2021.
“Fundamental Flaw”
China’s tougher stance on tech companies prompted SoftBank to be more conservative when investing in companies in the Asian giant, with Son saying the company still identifies investment opportunities in this market but conceded it would be more careful.
“We believe there are still a lot of great companies [in China], for those companies we would still like to invest, but [a] relatively smaller size.”
Kirk Boodry, an analyst at Redex Research, told Bloomberg: “There is much less visibility on this part of the portfolio, particularly at Vision Fund 2 where many of these investments are smaller or at an earlier stage… SoftBank will likely take meaningful losses in the private portfolio too.”
Amir Anvarzadeh of Asymmetric Advisors said, “Softbank’s entire business structure is dependent on one key assumption and that is ever-rising stock prices.” This “fundamental flaw” has been revealed by the bear market.
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