Japan’s Softbank Group recorded a huge deficit in the fourth quarter of last year due to the loss of vision funds mainly invested in technology stocks.
Softbank posted a deficit net loss of USD 5.9 billion in the fourth quarter of last year, Bloomberg reported on the 7th (local time). The decisive cause is a loss of $5.8 billion from Softbank’s vision fund.
Amid the overall fall in stock prices of investment companies due to the global economic downturn this year, the bankruptcy filing of FTX, the world’s top three virtual asset exchanges, is putting a burden on Softbank’s performance. Softbank lost all of its $97 million investment in FTX in the fourth quarter.
Softbank invested more than 140 billion dollars in technology startups such as Uber, DoorDash, and WeWork through Vision Fund from 2017 to last year. When the ransom of these companies soared to a record high, they earned $66.4 billion in valuation profits, but the situation has since reversed due to worsening management and a plunge in technology stocks.
The cumulative loss caused by the fall in stock prices of these companies amounts to $6.7 billion. Earlier, Softbank invested more than $10 billion in WeWork, followed by billions of dollars in loans during the restructuring in 2019, which led to the expulsion of WeWork founder Adam Newman, who caused controversy over marijuana use.
“This is not the right time to invest in startups,” said Yoshimitsu Goto, chief financial officer (CFO) who announced the results. We can become aggressive at any time, he said. “When the market situation is not as good as it is now, we have to reduce investment.”
The Wall Street Journal (WSJ) analyzed that Softbank’s investment reduction shows that the global IT industry is in serious financial difficulties.
Meanwhile, the vision fund’s new investment in the fourth quarter was only $300 million. It was less than one-fifth of the $15.6 billion investment in the first quarter of 2021.
Navnit Goville, chief investment officer (CFO) of Vision Fund, said about 30 companies under investment are preparing to be listed in case market conditions improve. However, regarding the market outlook, he said, “There is still uncertainty in the labor market, future financial policies, and corporate performance.”