TOKYO (AFP) – Japanese investment giant SoftBank Group yesterday logged a record annual net loss after a bruising year that saw its assets hit by a United States (US) tech-share rout and a regulatory crackdown in China.
SoftBank’s stakes in tech giants and volatile new ventures have made for unpredictable earnings, and the latest tumble comes with tech shares tanking as the US hikes interest rates to tackle inflation.
The company reported losses of JPY1.71 trillion (USD13.2 billion) in the year to March 2022 – a plunge from its nearly JPY5 trillion net profit the previous year, when huge market rallies boosted results.
Reporting an eye-watering investment loss of JPY3.4 trillion, SoftBank said its tech-focussed Vision Fund has suffered falls “due to a decline in the share prices of most listed portfolio companies”.
In the past six months, the tech-rich US Nasdaq index has lost more than 28 per cent of its value.
The Japanese group’s losses were deepened by the many shares it holds in Chinese ride-hailing giant Didi Chuxing and e-commerce group Alibaba, which have been hit by a crackdown by Beijing on the country’s private sector.
And the icing on the cake was the falling yen, which has recently hit 20-year lows as the gap widens between US tightening and Japan’s ultra-loose monetary policy.
SoftBank attributed a net loss of JPY706 billion to the weaker yen.
In 2019-20, SoftBank Group reported a then-record net loss of JPY961.6 billion, as COVID-19 compounded woes caused by its investment in troubled office-sharing start-up WeWork.
But its earnings rebounded in 2020-21 – when it reported Japan’s biggest-ever annual net profit – after people moved their lives online during the pandemic, sending tech stocks soaring.
In February, SoftBank said the USD40-billion sale of its microchip powerhouse Arm to Nvidia had collapsed because of “significant regulatory challenges”, and it now plans to take the unit public.
Nvidia is one of the world’s largest and most valuable computing companies, while Arm’s tech dominates the smartphone market.
SoftBank had announced the deal in 2020, when it was valued at USD40 billion.
Toyo Securities senior analyst Hideki Yasuda told AFP that while the tech sector is not doing well, it’s worth taking the long view, noting that it took years for Alibaba to become a viable investment for SoftBank.
“It’s important for investors (like SoftBank) to think about what might happen in 20 years,” he said.
