Japanese company SoftBank has stated that it is likely to register its first operating loss in 15 years owing to the dwindling value of its tech investments. SoftBank is expecting operating loss of $12.5 bn (1.35 trillion yen) for the FY that ended in March. Much to the dismay of the company, it has forecast a 1.8 trillion yen loss stemming from Vision Fund; and, 800 bn yen in losses from its own investments. The company has blamed COVID-19 pandemic for the “deteriorating market environment.”
Reportedly, SoftBank has written down the investment value in companies such as WeWork (an office rental startup) and OneWeb (a satellite operator) that filed for bankruptcy in March. Shares of SoftBank plunged to 4.025 yen (4.2%) in Tokyo on Tuesday.
Founder of SoftBank Masayoshi Son has faced the brunt ever since the collapse of IPO of WeWork in 2019 and bailout by the company. The company counted on sharing-economy startups that enabled people to split the use of cars or offices. However, COVID-19 pandemic has left those investments in the lurch.
Head of Asian Research at United First Partners Justin Tang likened the loss to the perfect storm and wondered if there are more gloomy days.
The Vision fund is speculated to have written down around 1 trillion in assets in the March quarter on the basis of its earlier earnings. It is worth noting that the company shied away from disclosing which vision fund investment would be written down.
SoftBank’s shares have plunged more than 50% and their credit default swaps soared to the highest levels in 10 years. The woes do not seem to die down as investors appear cynical. The Elliott Management Corp., the U.S. activist investor that has significant share in SoftBank has pitched for changes in investing practices and governance.