Japan's SoftBank sees $26BILLION wiped from notorious Vision Fund which invested in WeWork

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Vision Fund, the $100bn tech investment arm of Japan‘s SoftBank notorious for owning the majority stake in WeWork, reported a record $26.2 billion loss today as rising interest rates and political instability whiplashed high-growth tech stocks.

In the past six months, the tech-rich US Nasdaq index has lost more than 28 per cent of its value, while regulatory crackdowns in China have wiped eye-watering sums of money off Vision Funds investments there.  

The investment arm owns large stakes in ride-hailing companies Didi Global and Grab, as well as the ‘Amazon of China’ Alibaba – but all companies have been subject to stringent new restrictions as well as massive fines to discourage market dominance.

The historic loss has placed Founder and CEO Masayoshi Son under intense scrutiny amid investors for his strategy of concentrating heavily on riskier tech stocks in exchange for massive profit.

SoftBank Group reported a total annual net loss of $13.15bn, forcing Son to declare a new approach of financial prudence and selective investing to minimise further losses.

‘When it comes to new investments, we are being more selective,’ he said.

‘As the world is in chaos, we want to make sure that we have plenty of cash… instead of making new investments randomly.’

Son, 64, previously said his investment in office sharing space WeWork was ‘foolish’ when SoftBank valued the company at $2.9bn in March 2020, after it had been valued as high as $47bn just one year prior before a botched effort to take the company public.

The historic loss has placed Founder and CEO Masayoshi Son under intense scrutiny amid investors for his strategy of concentrating heavily on riskier tech stocks in exchange for massive profit

Son, 64, previously said his investment in office sharing space WeWork was ‘foolish’ when SoftBank valued the company at $2.9bn in March 2020, after it had been valued as high as $47bn just one year prior before a botched effort to take the company public

The investment arm owns large stakes in ride-hailing companies Didi Global and Grab, as well as the ‘Amazon of China’ Alibaba – but all companies have been subject to stringent new restrictions as well as massive fines to discourage market dominance

The spectacular implosion of WeWork valuation has been told in an Apple TV series starring Hollywood actors Anne Hathaway and Jared Leto, after the co-working space saw 90 per cent wiped off its total valuation in the space of a year.

Concerns over the company’s strange corporate structure and myriad financial hits, coupled with the advent of the Covid-19 pandemic in early 2020, saw WeWork’s value tank and led to Vision Fund posting an annual loss of $18bn in May 2020.

At the time of the loss, Son announced: ‘We made a failure on investing in WeWork and I’ve been admitting that several times I was foolish.’

This week, Son said the group has been able to reduce its risk exposure in China amid Xi Jinping’s regulatory crackdown, arguing there were still ‘great companies’ in China, but that SoftBank wanted to invest in smaller amounts.

Son’s earnings presentations are closely watched for clues into his thinking about the future of his sprawling tech conglomerate. 

On Thursday, he repeatedly emphasised the group’s financial prudence and the prospects for microchip designing company Arm, which SoftBank hopes to list in the United States.

In February, SoftBank said the almost $40bn sale of Arm to computing giant Nvidia had collapsed because of ‘significant regulatory challenges’ over competition concerns, and it now plans to take the unit public.

Amir Anvarzadeh of Asymmetric Advisors said ‘all hopes’ were now on Arm going public, but warned that a very high price would eventually prove damaging.

‘We suspect anything more than $30bn for Arm will leave it overvalued and vulnerable to a likely sell-off soon after,’ he said.

The spectacular implosion of WeWork valuation has been told in an Apple TV series starring Hollywood actors Anne Hathaway and Jared Leto, after the co-working space saw 90 per cent wiped off its total valuation in the space of a year

On Thursday, Son repeatedly emphasised SoftBank group’s financial prudence and the prospects for microchip designing company Arm, which SoftBank hopes to list in the United States

In February, SoftBank said the almost $40bn sale of Arm to computing giant Nvidia had collapsed because of ‘significant regulatory challenges’ over competition concerns, and it now plans to take the unit public (graphic shows scale of planned sale of Arm to Nvidia)

The Vision Fund has around 450 companies in its portfolio and made 43 investments during the fourth quarter. 

It is slowing the pace of investment in the current quarter as private prices lag the fall in public markets.

While 20 portfolio companies raised funds at higher valuations during the quarter, SoftBank also marked down some of its unlisted assets, contributing to the record loss, in sectors such as consumer, fintech and transportation.

Son has described SoftBank as a goose laying golden eggs but the pace of listings has slowed with one notable recent exception, Indonesia’s GoTo, a holding company which was born as the result of a major merger between a ride-hailing giant and an e-commerce empire. 

But GoTo’s shares have been sliding continuously since the company was taken public last month.

SoftBank also recorded, in its non-consolidated earnings, a 669.5 billion yen loss due to its SB Northstar trading arm, which had placed bets on listed stocks and derivatives.