Softbank posts worst losses ever as Jack Ma departs board

Japan’s SoftBank Group Corp reported a stunning $18bn loss at its giant Vision Fund, pushing Masayoshi Son’s conglomerate to a record loss and highlighting the deepening crisis with its portfolio companies from the global downturn. The news came just hours after the company said Jack Ma, the co-founder of Chinese e-commerce Alibaba, resigned from SoftBank’s board. 

The disastrous 1.9 trillion yen ($18bn) operating shortfall at the Saudi-backed Vision Fund, including losses of almost $10bn at office-sharing firm WeWork and ride-hailing app Uber Technologies Inc alone, left SoftBank with its worst annual loss of 1.4 trillion yen ($13bn). 

Son, who has been pressured by United States hedge fund Elliott Management to make share buybacks and bolster governance, said SoftBank would raise 1.25 trillion yen ($11.6bn) against its stake in Alibaba Group, which is the largest asset in its portfolio.

“The coronavirus is an unprecedented crisis,” a notably downbeat Son told an earnings presentation, comparing it with the Great Depression.

Appearing far more subdued than usual, Son said some of his tech unicorns had fallen “into the valley of the coronavirus”.

“I believe some of them will fly over the valley,” he added, standing beside a slide depicting cartoon unicorns dropping into a hole as a lone winged unicorn escaped to the other side.

The crisis has pushed the Vision Fund’s portfolio underwater, with its $75bn investment in 88 startups worth $69.6bn at the end of March. The $100bn fund had already delivered two consecutive quarters of losses before being upended by the outbreak.

SoftBank booked a $7.5bn loss on other tech investments, which it attributed primarily to the economic shock caused by the coronavirus pandemic. The outbreak has exacerbated underlying problems at many of its bets on unproven startups.

Scant detail

SoftBank provided scant detail on which companies saw writedowns but offered a sector breakdown showing investments in construction and real estate were worth less than half of cost price, with flagship transportation investments also under water. 

The company has leveraged its investments to supply further funding for other bets – a strategy that has come under strain as valuations tumble – with losses larger than the group’s revised estimate from just last month.

SoftBank-backed satellite operator OneWeb filed for bankruptcy in late March, adding to an impairment loss for investments held outside the Vision Fund that also includes part of the stake in WeWork.

The group pointed to further pain to come, saying “uncertainty in its investment business will remain over the next fiscal year” if the pandemic continues.

Son declined to set a dividend for the current financial year for the first time, underscoring the pressure for SoftBank.

With his usual emphasis on the total value of SoftBank’s assets rather than profits, which are buffeted by the Vision Fund’s nebulous valuations, Son admitted that shareholder value has fallen and net debt grown this year.

The turmoil has given leverage to activist shareholder Elliott, which, in addition to recommending share buybacks, is pushing for greater transparency and oversight.

The demands echo critics who argue SoftBank is dominated by Son and offers little visibility on how the valuations that drive its profit are reached.

The group has pledged the sale or monetisation of $41bn in assets, in part to finance a 2.5-trillion-yen ($23.3bn) buyback to prop up its share price. By the end of April it had spent 250 billion yen ($2.3bn) on share purchases.