SoftBank reports record loss as tech cos’ shares tank

TOKYO: Japanese investment giant SoftBank Group on Thursday logged a record annual net loss after a bruising year that saw its assets hit by a US tech share rout and a regulatory crackdown in China.

SoftBank’s big stakes in global tech giants and volatile new ventures have made for unpredictable earnings, and the latest tumble comes with tech shares tanking as the US hikes interest rates to tackle inflation.

The company reported losses of 1.71 trillion yen ($13.2 billion) in the year to March 2022, a plunge from its nearly five trillion yen net profit the previous year, when huge market rallies boosted results.

Reporting an eye-watering investment loss of 3.4 trillion yen, SoftBank said its tech-focused Vision Fund suffered falls “due to a decline in the share prices of most listed portfolio companies”.

In the past six months, the tech-rich US Nasdaq index has lost more than 28 percent of its value.

The Japanese group’s losses were deepened by the many shares it holds in Chinese ridehailing giant Didi Chuxing and e-commerce group Alibaba, which have been hit by a crackdown by Beijing on the country’s private sector. The icing on the cake was the falling yen, which recently hit 20-year lows as the gap widened between US tightening and Japan’s ultraloose monetary policy.

In 2019-20, SoftBank Group reported a then record net loss of 961.6 billion yen, as the coronavirus outbreak compounded woes caused by its investment in troubled office- sharing start-up WeWork.

However, its earnings rebounded in 2020-21, when it reported Japan’s biggest-ever annual net profit, after people moved their lives online during the pandemic, sending tech stocks soaring.

In February, SoftBank said the $40 billion sale of its microchip powerhouse Arm to Nvidia had collapsed because of “significant regulatory challenges” over competition concerns, and it now plans to take the unit public. Nvidia is one of the world’s largest and most valuable computing companies, while British company Arm’s tech dominates the global smartphone market. SoftBank had announced the deal in 2020 when it was valued at $40 billion, though the sum would have been higher now because of a rise in Nvidia’s share price.

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 $30 billion for Arm will leave it overvalued and vulnerable to a likely selloff soon after.”

The IPO faces headwinds, including the current market slump which makes a hefty valuation for Arm unlikely, and SoftBank CEO Masayoshi Son conceded the move could be delayed if conditions seemed unfavourable.

Hideki Yasuda, senior analyst at Toyo Securities, said that while the tech sector SoftBank is focused on is not doing well now, it is worth taking the long view.

“It’s important for investors to think about what might happen in 20 years,” he said before the earnings announcement.