Japan's SoftBank Group Corp fell to a quarterly loss on Tuesday, as its giant Vision Fund investment unit remained in the red for a fourth straight quarter, sharpening focus on when markets will recover enough to allow it to list some assets.
The Vision Fund, which upended the world of technology with its big bets on startups, reported an investment loss of 730.36 billion yen ($5.52 billion) in the fiscal third quarter. At SoftBank itself, the net loss totalled 783.42 billion yen, compared with a 29.05 billion yen profit a year earlier.
The results could make investors even more keen to see an initial public offering (IPO) of British chip designer Arm, considered one of the sprawling conglomerate's prize assets. SoftBank aims to list Arm by March 2024, Chief Financial Officer Yoshimitsu Goto told a briefing following the release of the results.
Still, he sounded cautious about business overall.
"The situation remains tough," he said.
The market turmoil since last year - and SoftBank's results themselves - show how rising interest rates, deepening US-China tensions and Russia's invasion of Ukraine have worked to blunt investor appetite for riskier assets, casting a shadow over the Japanese group's vast portfolio of startup investments.
Arm has made "good progress in terms of being IPO-ready," Navneet Govil, the fund's chief financial officer, told Reuters after the results, adding there were about 30 companies in the fund's portfolio that are set to go public when markets are ready.
SoftBank said the Vision Fund unit had significantly curtailed new investments and was continuing to sell some older ones as part of "prudent defensive financial management" amid the challenging market environment.
Notably, founder and chief executive Masayoshi Son - who is synonymous with SoftBank - did not speak at the results presentation. He said in November he would not be making such appearances for the time being, to better focus on Arm's growth.
Good Arm
The bulk of the loss at the Vision Fund unit came from a steep decline in the valuation of investments in unlisted companies. The unit had investments in 348 companies as of end-December, of which 311 are private firms.
Among listed portfolio companies, Indonesian ride hailing company Goto Gojek Tokopedia PT, South Korean e-commerce platform Coupang Inc and workspace provider WeWork Inc contributed to the loss.
Arm posted a 28 per cent jump in quarterly net sales to $746 million, helped by higher royalty revenues of its high-end 5G smartphone chips.
It has more than 95 per cent market share of the main communication chips used in mobile devices. Still, SoftBank warned the chip designer is also bracing for the impact of a broader tech industry slowdown.
"Some of Arm's customers have indicated that inventory levels are very high across the value chain, which may result in their revenues declining for a short period until inventory levels are lower," it said in a statement.
The net loss also marked a sharp turnaround from the 3 trillion yen profit SoftBank reported in the prior quarter, for July-September, when it was buoyed by the sale of some of its stake in China's Alibaba Group Holding.
Son invested heavily in artificial intelligence and other high-tech startups through the Vision Fund in recent years, delivering both record profits and heady optimism about future valuations. He has since been forced to cut back on investment activity and disappointed the market in November when the company did not announce further share buybacks. SoftBank did not unveil a fresh buyback scheme on Tuesday, either.
($1 = 132.2200 yen)
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