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SoftBank Group posted an unexpected ¥931bn ($6.2bn) net loss in its second quarter, compounding the pain for shareholders and founder Masayoshi Son after one of the group’s biggest bets, WeWork, filed for bankruptcy this week.
It was the fourth consecutive quarter in the red for the Japanese conglomerate, as gains from the initial public offering of chip designer Arm and the investments of its first Vision Fund failed to offset the impact of a weak yen, declines in the valuations of WeWork and other companies, and derivative losses in the three-month period ending in September.
Analysts had expected a net profit of ¥180.8bn, according to S&P Capital IQ. The group had made ¥3tn in net profit in the same quarter last year after selling a stake in Chinese ecommerce group Alibaba.
SoftBank said on Thursday that after some accounting adjustments, its tech-heavy Vision Funds made an investment gain of $300mn in the second quarter — with Vision Fund 1 making a gain of $2.5bn on the back of the Arm sale but Vision Fund 2 falling to a $2.1bn loss, driven by a decline in the value of its public portfolio. Its LatAm Funds also made a $100mn loss.
The Vision Funds’ public portfolio lost value in the second quarter for the first time in 12 months, according to Kirk Boodry, a SoftBank analyst at Astris Advisory in Tokyo, driven by a reversal in fortunes for logistics companies such as warehouse robotics group AutoStore, as well as consumer fintech Better, after it listed through a merger with a special purpose acquisition company in August.
The second-quarter loss comes as Son hunts for deals in artificial intelligence, fuelled by an expanded war chest following the initial public offering of UK chip designer Arm.
“With Arm distractions fading and even more cash in, we expect the pace of investments to increase,” Boodry wrote in a note to clients before the results.
Son told shareholders in June the company was going on the “counteroffensive” after years of asset sales and losses at the Vision Funds, including on start-ups such as WeWork, the once high-flying desk-renting start-up hit hard by the pandemic after being heavily backed by SoftBank.
The conglomerate was forced to wire $1.5bn to Goldman Sachs and other lenders days before WeWork filed for bankruptcy this week, taking the total SoftBank has committed to the failed shared-office start-up to more than $16bn since its initial investment in 2017, filings analysed by the Financial Times showed.
On Thursday, SoftBank said credit support provided by the Vision Funds “for a letter of credit facility to WeWork from certain financial institutions” increased its liabilities by ¥57bn last quarter. It added that it took a ¥21.6bn loss after exchanging unsecured WeWork notes for shares and convertible bonds.