By Sam Nussey
TOKYO – SoftBank Group Corp is planning to cut headcount at its flagship Vision Fund investing arm, CEO Masayoshi Son said on Monday, after a crash in the value of its portfolio pushed his conglomerate to a record quarterly net loss.
Vision Fund, which upended the world of venture capital with splashy bets on startups such as ridehailers Uber and Didi, posted a $23.1 billion loss in the April-June quarter as value evaporated from its investments in the market rout.
“The world is in great confusion,” Son said at an earnings news conference.
The result caps a tumultous six months for the Vision Fund, which posted a record $26.2 billion quarterly loss in May after SoftBank was caught out by rising interest rates and political instability that hammered markets globally.
Son has already radically scaled back investment activity. The Vision Fund arm approved just $600 million in new investments in the first quarter, compared with $20.6 billion in the same period a year earlier.
On Monday, the billionaire pledged to go further: limiting the second fund just to managing its current portfolio of investments, while planning workforce cuts at Vision Fund and cost reductions across the group.
“We need to cut costs with no sacred areas,” Son said.
Son had already suffered a series of high-profile reversals after big bets by the first Vision Fund in late-stage startups such as office sharing company WeWork soured, prompting him to tighten investment controls with the second fund.
However the billionaire said Vision Fund 2, which has taken smaller stakes in a larger number of companies, had invested at frothy prices.
“We were in a kind of bubble on valuations,” he said.
The second Vision Fund’s portfolio of 269 firms, which cost $48.2 billion to acquire, was worth just $37.2 billion at end-June.
“If we had been more selective and invested better we wouldn’t have received this heavy blow,” Son said.
Listed investments that fell during the quarter included warehouse robotics firm AutoStore Holdings Ltd and artificial intelligence firm SenseTime Group Inc.
SoftBank wrote down the value of unlisted assets across its two Vision Funds by 1.14 trillion yen ($8.45 billion).
Plunging initial public offering volumes and market scepticism towards money-losing startups have squeezed an important source of capital for SoftBank, which hopes to list chip designer Arm following the collapse of a sale to Nvidia.
To raise cash, SoftBank has exited companies including Uber Technologies and home-selling platform Opendoor Technologies, for a total gain of $5.6 billion.
SoftBank sold Uber at an average share price of $41.47, compared to the Friday closing price of $32.01.
The group has used more than two-thirds of the capital in a 1 trillion yen buyback programme launched last November to support its shares, which have fallen by about half from highs in March last year.
SoftBank on Monday announced an additional share repurchase programme worth up to 400 billion yen to run to August next year. Shares closed up 0.7%, before the earnings were released, in line with the benchmark Nikkei 225 index.
The conglomerate is not the only investor heavily exposed to the high-growth stocks now shunned by investors.
Hedge fund Tiger Global, which competes with “unicorn hunter” Son on deals, saw its flagship fund fall 50% in the first half of the year after it underestimated the impact of surging inflation on markets.
($1 = 134.9000 yen)
(Reporting by Sam Nussey; Editing by Edmund Klamann, David Dolan, Kirsten Donovan)