SoftBank Group shares slumped 2.22 percent on Thursday (Nov. 7) after the Japanese investment powerhouse reported its first quarterly operating loss in 14 years. SoftBank posted a loss of ¥706 billion ($6.47 billion) in the July-to-September period, weighed down by a massive hit to its giant Vision Fund. The tech fund, which is backed by Saudi Arabia and run by ex-Deutsche Bank banker Rajeev Misra, has been hit by big losses in portfolio companies such as Uber and WeWork.
Ride-hailing company Uber has lost more than a quarter of its value since going public in May.In the July to September quarter, its shares fell 34%. Office-sharing startup WeWork was valued at $7.8 billion at the end of September. In January, it was valued at $47 billion.
Last month, SoftBank was forced to spend more than $10bn to bail out WeWork after its botched attempt at a public share offering of shares in New York. WeWork's cofounder Adam Neumann stepped down as CEO in September before the company shelved its IPO indefinitely.
“Our financial results this time are totally shattered,” SoftBank's founder, chairman and CEO Masayoshi Son, 62 told a news conference in Tokyo after the figures were released. “I greatly regret my bad investment judgment.”
Son admitted he turned a "blind eye" to problems with Neumann in areas such as corporate governance and said he learned a "harsh lesson" from the company's failed IPO attempt.
"I overestimated Adam Neumann's good side. I should have known better."
In fact, the value of most of the Japanese firm's listed investments made via its Vision Fund, declined in the latest quarter, including office messaging platform Slack Technologies and precision cancer medicine company Guardant Health.
The Fund has invested $70.7 billion in 88 start-ups. Those investments are now worth $77.6 billion.
Softbank also saw its group net profit halved for the six months to September, with net profit sinking 49.8 percent to ¥421.6 billion on an operating loss of ¥15.6 billion. The company did not release a forecast for the current business year, saying there were too many uncertainties.
The dismal figures could complicate Son’s efforts to raise an even larger successor to his $100 billion Vision Fund if investors question his high-risk strategy of splashing out big on cash-burning tech startups in the hope that they can expand rapidly and dominate their sectors.
The billionaire said he expects the second Vision Fund to go ahead as scheduled, and at a similar size to the first fund. He also said that although Softbank was in "the rough sea", WeWork was "not a sinking boat".
Son's personal net worth has plunged by about $6bn since July, when it peaked at about $20bn, according to the Bloomberg Billionaires Index.
Despite the massive quarterly loss, SoftBank's shares jumped 2.79% on Friday (Nov. 8). The Tokyo-based company's shares are up about 18% this year.