SoftBank’s Tech Boom Goes Bust—Again

SoftBank of Japan 9434 -5.95%

is the epitome of the excesses that fueled the tech stock boom. With the market in decline, Japanese tech investors inevitably share in the fate of tech stocks. Furthermore, real pain for the company – and its investors – could still lie ahead.

SoftBank on Thursday reported a loss of about 1.71 trillion yen, or $13.2 billion, for the fiscal year ending March – the company’s biggest ever loss in four decades. century of existence. That was a significant reversal from a record net profit of nearly 5 trillion yen in the previous financial year.

Investment losses last quarter from SoftBank’s $100 billion Vision Fund and its legacy funds were the biggest losses. The funds reported an investment loss of about $29 billion for the previous fiscal year. Nearly half of the Vision Fund’s accumulated profits since its inception have evaporated.

All this red ink is forcing SoftBank founder Masayoshi Son to defend. He said during Thursday’s earnings press conference that the company will continue to monetize its assets and will set stricter criteria for investments. The former, however, can be a challenge given how much the market has fallen.

Even tougher days are ahead. Tech stocks fell further in his quarter, especially the fast-growing, non-yielding ones that SoftBank is particularly fond of. For example, two SoftBank investments – Chinese ride-hailing giant Didi and South Korean e-commerce company Coupang – have lost nearly 70% of their stock value this year.

And SoftBank’s portfolio of private startups could be much worse. As investors shift their focus from relentless growth at all costs to profitability, funding for such startups is likely to dry up and valuations will drop.

Chinese e-commerce giant Alibaba – the company’s biggest investment – is also hurting SoftBank. Alibaba’s 33% loss in share price this year did not appear on SoftBank’s earnings report due to the accounting treatment. But it still drags down SoftBank’s net worth – Mr. Son’s favorite metric for valuing a company. SoftBank’s net worth stood at 18.5 trillion yen at the end of March, down 0.8 trillion yen from the previous quarter. It may be even lower now.

Longtime followers of the company will feel a bit bored. SoftBank’s stock price is down 99% from its peak after the dot-com bubble burst. High-tech valuations pushed SoftBank’s share price back to record highs last year.

The company’s reckless investment will now pull the company back to normal.

Write letter for Jacky Wong at jacky.wong@wsj.com

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https://www.wsj.com/articles/softbanks-tech-boom-goes-bustagain-11652357244?mod=rss_markets_main SoftBank’s Tech Boom Goes Bust—Again

Edmund DeMarche

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