Following last year’s lows, SoftBank reported record-breaking profits from its Vision Fund private equity portfolio – then took another downward turn.
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Deep in what SoftBank founder Masayoshi Son called the “valley of coronavirus”, the Japanese conglomerate’s investments, which include stakes in energy and financial firms as well as technology, were pummelled, leading to its highest-ever operating loss. SoftBank was already in a tenuous position going into the pandemic, following its troubles with Uber and WeWork in 2019, which sent shockwaves through the private equity world.
SoftBank has since rebounded on an epic scale, raking in ¥1.93 trillion ($17.7 billion) for the three months ended March 31. This brought its annual profit to nearly $46 billion – the highest ever for a listed Japanese company.
SoftBank is known for making bold bets on startups; it started the Vision Fund – by some accounts the largest technology-focused venture capital fund in the world – for this very purpose. Of late its boldness has paid off. Son said that in the past year, 14 of SoftBank’s Vision Fund portfolio companies had an IPO or other exit. The biggest win was a $24 billion investment gain from the fund’s nearly 40% stake in Korean e-commerce firm Coupang. Food delivery company DoorDash also had a strong showing with its IPO.
This month SoftBank pledged to triple the size of its Vision Fund 2, launched in 2019, to $30 billion. As the New York Times reports, this second private equity fund is “solely company money”, while the original Vision Fund has $100 billion from a variety of investors. There are more big IPOs on the horizon for Vision Fund portfolio companies, including two from China: ByteDance, which owns TikTok, and ride-hailing firm Didi Chuxing.
SoftBank’s confidence is understandable, but some caution is also warranted. It was the biggest shareholder in British fintech firm Greensill Capital, which collapsed in March and filed for insolvency on May 10. There is also the matter of SoftBank’s massive buyback program, under which the company bought about $23 billion of its own shares.
Since announcing its recent record-breaking results, SoftBank has already suffered a setback. On May 13, the company’s share price tumbled as much as 8.7%, the biggest drop since the early days of the pandemic. In the space of three days, SoftBank lost over ¥6 trillion ($55 billion) in market value. The downward cycle is owed to its unwillingness to renew the buyback program, which has generated trepidation amongst investors and fuelled the scepticism of the company’s vocal critics.
