Japan’s SoftBank Group on Tuesday reported a surprise $5.9 billion net loss in the third quarter, as a slump in the tech sector continued to hit the investment behemoth’s bottom line.
The loss compared with the net profit of 29.0 billion yen ($219 million) the firm reported in the same three-month period last year.
Its two Vision Fund investment vehicles alone lost 660 billion yen ($5 billion) in October-December, “reflecting declines in the share prices of a wide range of portfolio companies”, SoftBank said.
The firm has made huge bets to find and grow hot new tech ventures around the world, but that has left its earnings vulnerable to fickle market forces, and its Vision Funds have reported losses for four straight quarters.
Interest rate hikes by the US Federal Reserve and other central banks to tackle inflation have weighed on global tech shares, putting pressure on SoftBank.
Its results have lurched between dizzying highs and lows in recent years, with China’s crackdown on its tech sector taking a toll on the company.
Second-quarter earnings were boosted by the sale of some shares in Alibaba as it reduced its stake to around 15 percent from 24 percent.
But it reported a record quarterly net loss for the first quarter, as tech shares tanked on interest rate hikes, a trend analysts said was likely to continue.
“Weakness in global equity markets remains the main risk to the SoftBank story,” said Kirk Boodry, an analyst at Redex Research who publishes on SmartKarma.
SoftBank CEO Masayoshi Son has regularly defended his strategy of making major bets on high-tech firms and start-ups, insisting that the approach will lead to a handful of significant wins that outweigh losses.
But his tactics have come under increasing scrutiny given the firm’s successive losses, and Son will no longer deliver the company’s results presentation.
– ‘Very tough’ –
His unusual presentation style, complete with images of unicorns riding over troughs, have been a staple of SoftBank’s quarterly results.
On Tuesday, however, his chief financial officer Yoshimitsu Goto is expected to do the talking instead, and faces explaining losses in firms like DoorDash.
Last quarter, he warned “we are very pessimistic”.
“We could make a lot of money if we knew when (share prices) will recover, but honestly, we don’t know,” Goto said.
Analysts said there was good reason to be cautious.
“The overall investment environment is very tough including on US shares,” Hideki Yasuda, an analyst at Toyo Securities, told AFP before the results.
But he and other observers think the firm could start to see the benefits of an improving situation in China.
“We are generally somewhat negative on Softbank’s positioning heading into 2023 with concerns on tech valuation at the forefront,” wrote Redex’s Broody.
“But a recovery in China… provides some support,” he added, noting that Beijing’s crackdown on tech firms and its anti-Covid policies “both appear to be leveling out”.
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