Japan’s SoftBank Group has surprised with a loss, but it has signalled a return to new investments as its Vision Fund unit turned profitable for the first time in six quarters.
During the April-June period, the Vision Fund unit recorded an investment gain of around 160 billion yen ($1.1 billion), buoyed by an increased valuation of Arm, the chip designer slated for an upcoming initial public offering.
Excluding the boost from Arm, the outlook was less positive, as SoftBank’s Vision Funds collectively reported a combined loss of 13 billion yen.
Since May 2022, the investment giant had been operating in “defence mode” following tech valuation declines attributed to significantly higher interest rates and global banking sector concerns. However, in June, founder and CEO Masayoshi Son expressed plans to transition to “offence” mode amid excitement surrounding advancements in artificial intelligence.
This strategic shift is evident in the first-quarter results, as Chief Financial Officer Yoshimitsu Goto informed reporters that the company was “timidly” embarking on selective new investments.
SoftBank made investments totalling $1.8 billion in the quarter, a departure from the previous three quarters when investments were pared down to approximately $500 million.
Vision Fund finance chief Navneet Govil emphasised, “The bar for investment is very high. They have to be companies that are focused on next-generation AI with high growth potential.”
During the quarter, the unit divested holdings worth approximately $890 million, including full exits from three portfolio companies and partial exits from several publicly traded portfolio firms.
In response to notable investment setbacks, particularly with WeWork whose shares have plummeted 98% since its public listing in October 2021, Son has adopted a more cautious investment approach.
The Vision Fund unit underwent staff reductions in the recent quarter, confirming prior reports of cuts and following an earlier round of headcount reductions in September 2022.
Although a specific figure wasn’t provided, Govil mentioned that the unit has been “right-sized.”
Overall, SoftBank reported a third consecutive quarterly loss due to declining valuations of significant investments like Alibaba Group, Deutsche Telekom, and T-Mobile U.S..
The net loss amounted to 477.6 billion yen ($3.3 billion), a fraction of the 3.16 trillion yen loss during the same period a year earlier, but significantly contrasting market expectations of a 75 billion yen net profit.
SoftBank has been pursuing a listing for Arm after its deal to sell the chip designer to Nvidia Corp was thwarted last year by objections from U.S. and European antitrust regulators.
Sources indicated a potential U.S. listing could raise between $8 billion and $10 billion. Although no details were provided regarding a listing date or fundraising goal, Goto indicated that preparations were progressing “very smoothly.”
Arm reported a 10.8% decline in quarterly sales to $641 million amid a broader downturn in the global chip industry driven by weak consumer demand.
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