SoftBank Group faced a surprising setback with an unexpected net loss of 931 billion yen ($6.2 billion) in the second quarter, marking the fourth consecutive quarter in the red for the Japanese conglomerate.
This development compounds challenges for shareholders and founder Masayoshi Son, particularly following WeWork's recent bankruptcy filing—one of the group's significant investments.
Despite gains from the initial public offering of chip designer Arm, the weak yen and greater-than-anticipated writedowns in private market valuations during the three-month period ending September contributed to the disappointing financial results.
Analysts, who had projected a net profit of 180.8 billion yen according to S&P Capital IQ, were taken aback by the unexpected loss.
In the same quarter last year, the group had achieved a net profit of 3 trillion yen, primarily driven by the sale of a stake in Chinese e-commerce group Alibaba.
“It was a disappointing quarter. We didn’t expect them to take impairment charges for private investments and at a higher rate than the last quarter,” said Kirk Boodry, a SoftBank analyst at Astris Advisory in Tokyo, highlighting $2.9 billion of writedowns in the private portfolio at the group’s flagship Vision Funds, Financial Times reported.
“There was an expectation when they took some pretty steep writedowns in the fourth quarter that they had sort of kitchen-sinked everything,” Boordy added.
SoftBank disclosed on Thursday that, following accounting adjustments, its technology-focused Vision Funds reported an overall investment gain of $300 million in the second quarter.
Notably, Vision Fund 1 registered a gain of $2.5 billion, attributed to the sale of its stake in Arm to SoftBank. However, Vision Fund 2 experienced a loss of $2.1 billion during the same period.
The LatAm Funds also incurred a loss of $100 million, as reported by Financial Times.
Interestingly, the public portfolio of the Vision Funds recorded a decline in value in the second quarter, marking the first time in 12 months.
This shift was influenced by a downturn in fortunes for logistics companies, including warehouse robotics group AutoStore, and consumer fintech Better, which underwent a listing via a merger with a special purpose acquisition company in August.
(With Agency Inputs)
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