Softbank’s Son has survived bigger disasters than this

THE results from Softbank Group Corp are in, and they’re not good. They’re disastrous.

Even for a company that was widely expected to have a bad year, its results for the 12 months ended March 31 were gasp-inducing.

The segment housing its Vision Funds swung to a loss of Us$20.5bil (Rm90.1bil).

For the group as a whole, the Us$13.3bil (Rm58.4bil) net loss was the second-worst ever annual shortfall by a Japanese company, according to Kyodo News.

The question for founder Masayoshi Son: Can the world’s largest venture capital fund survive in an era where money is no longer free?

Son’s many critics, particularly those from the Wework era, will be rubbing their hands in glee, particularly to learn that he himself is on the hook for Us$2.4bil (Rm10.6bil) from the firm’s stock-trading programme.

But it’s too soon for detractors to celebrate, for Son has survived bigger challenges than this.

Son called for patience by pointing, as he regularly does, to his previous travails – and how he’s overcome them.

Market value

After the collapse of the dot-com boom two decades ago, Softbank’s market value collapsed in a pattern that looks eerily similar to that of the last few years. Like now, Son then drew the ire of investors who bought at the peak.

“My nickname back then became the ‘bald fraud’,” Son said in Tokyo on Thursday, with a self-deprecating laugh. “While it’s true that I’m balding, I believe I’m no charlatan.”

Son has certainly weathered storms in the past. Exactly two years ago, amid the market panic of the pandemic, Son struck an even more cautious tone, pausing dividend payments – something he declined to do today.

Record profits

The following year saw rebounds and record profits.

Son’s not one to be thrown off-course by a bad quarter, or even a bad year.

“When it rains, you open an umbrella,” he told Thursday’s briefing – suggesting the current market rout is just a passing shower.

And critics have predicted multiple times in the past that his firm would be washed out.

From the acquisition of Vodafone Group Plc’s Japan operations in the mid-2000s that got Son into the mobile phone business, to his purchase of Sprint, at the time the largest-ever overseas acquisition by a Japanese company, much less Wework, the reports of Softbank’s death have been greatly exaggerated.

The cuts from Wework were deep, but not fatal – and the damage was overstated, perhaps because of Wework’s familiarity to investors in the west.

But many of Son’s successes get less press, such as Us$2.2bil (Rm9.7bil) investment in South Korea’s Coupang Inc that is still Us$6bil (Rm26.37bil) in the black even after its recent plunge.

The firm has captured much of the payments market in Japan, the world’s third-largest economy, with its Paypay operation, which is expected to go public in the next few

years.

Two-part strategy

An era of interest-rate increases means times are changing, but they’re not lethal to Softbank’s ambitions. Ventures will still need capital. New opportunities will still arise. To meet them, Son unveiled a two-part strategy of defense and offense.

The bad news for dog-walking startups and candy-delivery firms is that Softbank’s

easy-money spigot is being turned to “off,” with Son promising to be more selective with future investments, particularly in China.

Son also promised to have in cash twice the amount needed for the next two years of bond payments. Money is still cheap in Japan, even if the weakening yen means yen-denominated overseas purchases will look pricier.

Perhaps more concerningly, in the column marked “offense,” there is seemingly just one hope: Arm Ltd.

Son seemed to be putting a lot of eggs in the basket marked for the British chip designer, a firm he seems positively giddy over since the sale to Nvidia Corp collapsed earlier this year.

As investments dry up, we might even hear less from Son in the next few years. A time on the sidelines would be no bad thing. Perhaps the plan for now should be: speak softly, and carry a big umbrella.

Right timing

But it’s far from certain that Son can bring Arm to a successful listing – particularly in the current environment. Choosing the right time to list such an asset will be tricky.

In the short term, though, things are only likely to get worse. Softbank’s fiscal year ends in March, meaning tech’s extended losses in April and May will be reflected only next quarter.

As investments dry up, we might even hear less from Son in the next few years. A time on the sidelines would be no bad thing.

Perhaps the plan for now should be: speak softly, and carry a big umbrella. — Bloomberg

Gearoid Reidy writes for Bloomberg. The views expressed here are the writer’s own.