SoftBank Group logs $7.2b full-year loss on tech woes

TOKYO — SoftBank Group reported an annual net loss of over $7.2 billion on Thursday after a bruising year for the tech startup sector in which it is heavily invested.

The company said its annual net loss came to 970 billion yen ($7.2 billion) on sales of 6.57 trillion yen, reflecting in part major losses from its Vision Fund portfolios.

The Vision Fund 1 and 2 vehicles were hit by the global tech rout, SoftBank Group said in a statement.

But the depth of the group's loss was reduced by unwinding its stake in Chinese tech giant Alibaba.

"Share prices of numerous public portfolio companies declined for the fiscal year amid the weakness in global stock markets, although share prices of several companies rose in the fourth quarter," SoftBank said.

"The fair value of a wide range of private portfolio companies also decreased, reflecting markdowns of weaker-performing companies and share price declines among market comparable companies."

The two Vision funds recorded a whopping 4.3 trillion yen in losses ($32 billion), SoftBank said — a record, according to Bloomberg News.

SoftBank took hits across a range of startup investments, from long-struggling WeWork to delivery service DoorDash.

The Japanese group has made aggressive investments in tech startups and has been exposed to fickle market forces.

"SoftBank Group's performance very much depends on share prices," Hideki Yasuda of Toyo Securities told AFP ahead of the company's announcement.

Analysts fear more bad news may be on the cards.

"We believe that the private company portfolios... are at risk of further meaningful markdowns going forward," wrote Victor Galliano, an analyst who publishes on SmartKarma.

Vision Fund vehicles had reported losses for four straight quarters through December.

Risk evaluator Standard and Poor's gave SoftBank Group's long-term bonds a BB+ rating in February. 

The group said earlier this year that it was focused on "defence", though it was convinced of investment opportunities for artificial intelligence.

Led by billionaire founder Masayoshi Son, SoftBank Group is going through a broad rethink to restore its financial health, hit hard by global economic disruptions caused by the pandemic.

It is moving to take British semiconductor firm Arm public while selling down its stake in Alibaba. 

Britain had hoped to see the chip designer listed on the London stock exchange, but in March the firm and SoftBank said they would instead pursue a US-only listing for now.

SoftBank initially hoped to sell Arm to US chip giant Nvidia, but the $40 billion deal was scrapped over regulatory objections.

Son had reportedly hoped to secure a valuation of around $60 billion for Arm, but analysts say it will now be lucky to secure around half that — approximately what it paid for the firm in 2016.

SoftBank has also moved to offload almost all of its stake in e-commerce giant Alibaba, raising cash while limiting its exposure to China's tech crackdown.

The company once held more than 30 per cent of Alibaba, and said on Thursday it recorded gains of 4.8 billion yen in fiscal 2022 as it took steps to reduce its stake in its long-term partner.

The small amount of remaining shares will also be offloaded in one or two years, chief financial officer Yoshimitsu Goto told reporters.

He did not give exact figures, but the Financial Times reported last month that SoftBank plans to reduce its stake in Alibaba down to 3.8 per cent.