Japan’s Softbank Group Corp yesterday reported a surprise US$5.9 billion net loss in the fiscal 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 billion (US$220 million) the firm reported in the same three-month period last year.
Its two Vision Fund investment vehicles alone lost ￥660 billion in the October-to-December quarter, “reflecting declines in the share prices of a wide range of portfolio companies,” Softbank said.
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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.
“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 chief executive officer Masayoshi Son has regularly defended his strategy of making major bets on high-tech firms and start-ups, saying that the approach would lead to a handful of significant wins that outweigh losses.
However, his tactics have come under increasing scrutiny given the firm’s successive losses, and Son is not delivering the company’s results presentation. Softbank chief financial officer Yoshimitsu Goto was expected to do the talking instead yesterday.
Last quarter, Goto said that the company was “very pessimistic.”
Analysts said there was good reason to be cautious.
“The overall investment environment is very tough including on US shares,” Toyo Securities Co analyst Hideki Yasuda said before the results.
However, he and other observers say the firm might 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,” Broody wrote.
“But a recovery in China ... provides some support,” he said, adding that Beijing’s crackdown on tech firms and its COVID-19 policies “both appear to be leveling out.”
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