Three points you will get to know in this article:
- SoftBank Group reports a surprise loss, but its Vision Fund unit turns profitable, driven by Arm’s higher valuation.
- The company shifts from a defensive to a proactive stance, cautiously venturing into fresh investments focused on advanced AI.
- SoftBank implements strategic measures, including divestments and workforce adjustments, in response to investment setbacks.
Japan’s SoftBank Group surprised markets with a loss this time, but there’s a silver lining – the company is wading back into new investments. Their Vision Fund unit has finally turned profitable after six quarters in the red.
During the April-June period, the Vision Fund unit saw a substantial investment gain of around 160 billion yen ($1.1 billion), thanks to a higher valuation of Arm, a chip designer gearing up for an upcoming initial public offering.
However, when we remove the boost from Arm’s success, the situation isn’t as bright. The combined balance sheet of SoftBank’s Vision Funds shows a loss of 13 billion yen.
The investment giant has been in “defence mode” since May 2022 after tech valuations crashed due to sharply higher interest rates and jitters that hit the global banking sector. However, during the month of June, Masayoshi Son, the founder and CEO, expressed his intentions to transition into a proactive stance, driven by the enthusiasm surrounding progress in artificial intelligence.
This transformation became evident during the initial quarter findings. On Tuesday, Yoshimitsu Goto, the Chief Financial Officer, expressed to journalists that the company was cautiously venturing into specific fresh investments.
In the course of the quarter, SoftBank committed a sum of $1.8 billion to investments. This follows a reduction to approximately $500 million in the preceding three quarters.
“The standard for investment is exceptionally elevated,” remarked Navneet Govil, the Chief Financial Officer of the Vision Fund. “They must be enterprises centered on advanced AI of the next generation, displaying substantial potential for growth.”
The division divested approximately $890 million in holdings, encompassing complete exits from three companies in the portfolio and partial exits from various publicly listed firms in the portfolio.
Following a series of prominent investment setbacks, particularly the dramatic decline of 98% in the shares of WeWork, a notable instance, after its public listing in October 2021, Son has adopted a more cautious approach to investing. This has been executed in an entirely distinctive and user-friendly manner.”
During the recently concluded quarter, the Vision Fund unit made the decision to release a portion of its workforce, as shared by Govil. This action aligns with information from a Reuters article detailing these adjustments, which come after a prior series of staff reductions in September 2022.
According to an insider, it’s possible that as much as 30% of the team’s employees might face job cuts.. Govil did not give a figure but said the unit was now “right-sized”.
In the big picture, SoftBank reported a third consecutive quarterly loss, hit by decrement in valuations for major investments such as Alibaba Group, Deutsche Telekom, and T-Mobile U.S.
SoftBank Group navigates a complex investment landscape, finding a silver lining in the profitability of its Vision Fund unit while strategically recalibrating its approach to future investments in advanced AI technologies.
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