Wed. Dec 1st, 2021

The declining value of some of its popular IPOs and a repression of the technology sector by China led to a record loss.

SoftBank Group Corp. reported a record loss at its Vision Fund unit as the value of public property such as Coupang Inc. and Didi Global Inc. has dropped.

The unit’s loss in the three months ended September 30 was 825.1 billion yen ($ 7.3 billion), more than the loss of 788.6 billion yen that the business showed amid pandemic-driven write-offs. Overall, the Tokyo-based company had a net loss of 397.9 billion yen during the period.

Masayoshi Son’s Vision Fund has been a volatile contributor of profit and loss since its creation in 2017. The first downturn began in 2019 with Uber Technology Inc. ‘s disappointing public debut and the collapse of WeWork, followed by the impact of the coronavirus.

Then a global surge in technology stocks pushed Vision Fund’s earnings to new records for three consecutive quarters last fiscal year, thanks to watch list by South Korean e-commerce giant Coupang, US delivery firm DoorDash Inc. and the Chinese online real estate platform KE Holdings Inc. Now the declining value of some of those companies and a repression of the technology sector by Chinese regulators have pushed the business back into the red.

“If you look at the Vision Fund’s performance so far this year, virtually everything they’ve put on the market so far has lost money since listing,” said Kirk Boodry, an analyst at Redex Research in Tokyo. announcement said. “It is an incredibly poor performance record. They were behind far too expensive IPOs. It makes you wonder if this whole cycle of investing, to take the companies public and then get your money back, has been broken. ”

SoftBank’s shares fell by about 24% this year.

SoftBank’s losses billions of dollars
Coupang -6.7
Didi -6.1
KE Holdings -2.2
Volle Truck Alliance -1.2
Zymergen -0.7

The unrealized loss on valuation of public companies amounted to $ 17.7 billion in the quarter over SoftBank’s two Vision Funds. Coupang was responsible for $ 6.7 billion of the loss. Two quarters earlier, South Korean e-commerce leader Son had the best return since Alibaba Group Holding Ltd. ‘s listing when it contributed $ 24.5 billion to Vision Fund’s profits.

SoftBank’s portfolio of Chinese startups was hit particularly hard after the country’s regulators launched an offensive against the technology sector. Didi, whose debut at the end of the previous quarter was one of the biggest U.S. offerings of the past decade, lost $ 6.1 billion in the quarter and Uber-like truck startup Full Truck Alliance Co. was $ 1.2 billion lower.

KE Holdings Inc., which manages the Beike online real estate service, lost $ 2.2 billion in value. The unknown Chinese start-up handed SoftBank an unrealized $ 5.1 billion profit when it was announced in August 2020, pushing Vision Fund’s profit to a new record in that quarter. Although the company is not directly targeted by regulators, its share is more than 70% lower from its peak and trades below the IPO price.

“The Chinese regulators have no incentive to clear the air and publicly indicate that the repression is over,” Boodry said. “This uncertainty about the future of China technology may continue for a while.”

The losses in the public portfolio were offset by 455.9 billion yen in realized profits, as SoftBank paid in on some of its most successful investments. SoftBank sold $ 2.2 billion worth of DoorDash shares in August and gained about $ 1.69 billion from a sale of Coupang shares in September.

Sun has also significantly scaled down its controversial stock and options trading program and its entire stakes in Inc., Taiwan Semiconductor Manufacturing Co. and PayPal Holdings Inc. liquidated. ”Down from $ 13.6 billion at the end of the previous quarter.

“For the next few quarters, we do not have much to look forward to in the Vision Fund business,” Boodry said. “Sure, there are some upcoming IPOs they can refer to, but it’s just drowned out by all the negative noise. And none of them are going to be as big as Didi. ”

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