SoftBank seen posting killer Vision Fund loss on tech sale

The logo of SoftBank Corp is pictured during a news conference in Tokyo, Japan, February 4, 2021. REUTERS/Kim Kyung-Hoon

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TOKYO, May 9 (Reuters) – Japan’s SoftBank Group Corp (9984.T) is set to report a steep loss in its investment unit Vision Fund on Thursday, analysts said, after investors sold the shares growth companies favored by the fund with questions about their earning potential.

As the tech investor is poised to post full-year earnings, founder and chief executive Masayoshi Son’s comments on his risk appetite amid rising interest rates and war in Ukraine will also be a focus.

SoftBank suffered a slump in its technology assets in China and saw shares fall in January-March in major holding companies DiDi Global Inc (DIDI.N), Grab Holdings Ltd and Coupang Inc.

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The conglomerate is also likely to post losses on its unlisted portfolio, analysts said, as weakness in public markets spills over into private valuations.

“It’s hard to see they can come out of this quarter without writing down private assets,” said Redex Research analyst Kirk Boodry, who expects Vision Fund to post its biggest ever loss.

“They could be doing the same thing as two years ago and just kitchen sink stuff because they know the markets built in a bad quarter,” Boodry said.

The Vision Fund unit posted an investment loss of $8.9 billion in the second quarter before rebounding to an $850 million gain in the third, helped by gains in its private portfolio.

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The unit’s $100 billion Vision Fund specializes in big bets on late-stage tech startups, many of which have successfully gone public but are now trading below listing prices.

The $50 billion Vision Fund 2 invested smaller amounts but struggled with high prices for private assets as well as competition from rivals such as Tiger Global, the declining portfolio valuations also reducing SoftBank’s financial leeway.

Lack of visibility into the second fund’s portfolio and underperformance of listed assets means the fund has yet to catalyze an upward revaluation in SoftBank shares, which are trading at a discount to the value of stocks. group assets.

SoftBank is prioritizing investments through Vision Fund and liquidated its trading arm SB Northstar which racked up personal losses for Son with bets on derivatives and listed stocks such as Amazon.com Inc (AMZN.O) and Facebook , now Meta Platforms Inc (FB.O).

“We believe investment returns from other funds have also been weak, including the Latin American fund and SB Northstar,” Citigroup analyst Mitsunobu Tsuruo wrote in a client note.

SoftBank had about $35 billion in dry powder at the end of December and sold assets including Coupang and T-Mobile US Inc (TMUS.O). SoftBank shares, backed by a 1 trillion yen buyback program, are down 8% year-to-date.

Son’s investment crown jewel, his stake in Alibaba Group Holding Ltd (9988.HK), is worth around $60 billion after the Chinese e-commerce company lost around two-thirds of its value since late 2020 .

SoftBank is moving forward with plans to list chip designer Arm following the collapse of a sale to Nvidia Corp in an initial public offering that could add value to the company up to $60 billion, Reuters reported.

($1 = 130.5500 yen)

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Reporting by Sam Nussey; Editing by Christopher Cushing

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