SoftBank Vision Fund posts a record loss on Coupang plunge

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TOKYO: SoftBank Group Corp reported a record loss at its Vision Fund unit as the value of public holdings like Coupang Inc and Didi Global Inc plunged.

The unit’s loss in the three months ended Sept 30 was 825.1 billion yen (US$7.3bil or RM30.19bil), exceeding the 788.6 billion yen (RM28.87bil) loss the business posted amid pandemic-driven writedowns. Overall, the Tokyo-based company had a net loss of 397.9 billion yen (RM14.56bil) in the period.

Masayoshi Son’s Vision Fund has been a volatile contributor of profit and loss since its creation in 2017. The first downturn started in 2019 with Uber Technology Inc’s disappointing public debut and the implosion of WeWork, followed by the impact of the coronavirus.

Then, a global surge in technology shares boosted Vision Fund’s profit to new records for three consecutive quarters last fiscal year, thanks to blockbuster listings by South Korean e-commerce giant Coupang, US delivery firm DoorDash Inc and Chinese online property platform KE Holdings Inc.

Now the plunging value of some of those companies and a tech sector crackdown by Chinese regulators have once again pushed the business into the red.

“If you look at the Vision Fund’s performance so far this year, pretty much everything they brought to market so far has lost money since listing,” Kirk Boodry, an analyst at Redex Research in Tokyo, said ahead of the earnings announcement.

“That’s an incredibly poor track record. They have been behind a lot of overpriced initial public offerings (IPOs). It makes you wonder whether this whole cycle of investing, taking the companies public and then getting your money back is broken.”

SoftBank’s shares have slid about 24% this year.

The unrealised loss on valuation of public companies totalled US$17.7bil (RM73.55bil) in the quarter across SoftBank’s two Vision Funds. Coupang was responsible for US$6.7bil (RM27.84bil) of the loss. Two quarters earlier, the South Korean e-commerce leader marked Son’s best return since Alibaba Group Holding Ltd’s listing when it contributed US$24.5bil (RM101.81bil) to Vision Fund’s profit.

SoftBank’s portfolio of Chinese startups was particularly hard-hit after the country’s regulators launched an offensive against the tech sector. Didi, whose debut at the end of the previous quarter was one of the largest US offerings of the past decade, lost US$6.1bil (RM25.35bil) in the quarter and Uber-like trucking startup Full Truck Alliance Co was down US$1.2bil (RM4.98bil).

KE Holdings Inc, which runs the Beike online property service, lost US$2.2bil (RM9.14bil) of value. The little-known Chinese startup handed SoftBank an unrealised gain of US$5.1bil (RM21.19bil) when it went public in August 2020, pushing up Vision Fund profit to a new record in that quarter. Even though the company has not been directly targeted by regulators, its stock is down more than 70% from its peak and is trading below the IPO price.

“The Chinese regulators have no incentive in clearing the air and publicly signalling that the crackdown is over,” Boodry said. “This uncertainty over the future of China tech can go on for a while.”

The losses in the public portfolio were offset by 455.9 billion yen (RM16.68bil) of realised gains as SoftBank cashed in on some of its most successful investments. SoftBank sold US$2.2bil (RM9.14bil) worth of DoorDash stock in August. ― Bloomberg