SoftBank shares fall on expected record loss at Vision Fund

SoftBank’s shares fell almost 7 per cent to their lowest level in nearly two months on Thursday as investors braced for the possibility of another record quarterly loss for Masayoshi Son’s tech fund.

Rising interest rates and Beijing’s crackdown on the tech sector have led to punishing losses for holdings in SoftBank’s portfolio, with stubborn inflation and the prospect of more Federal Reserve rate rises hitting investor sentiment.

Following a record loss of $18.3bn in SoftBank’s Vision Fund’s publicly traded portfolio in the second quarter, which ended in October, Redex Research analyst Kirk Boodry estimated the Vision Fund’s public valuation could lose up to $18.6bn during the quarter ending March 31.

The biggest losers for the past quarter include Chinese ride-hailing giant Didi Chuxing, whose shares lost about half their value in the quarter and South Korean ecommerce platform Coupang, which fell about 40 per cent.

Other notable losers include Singaporean ride-hailing company Grab, US food delivery firm DoorDash and Indian payments group Paytm, which together lost close to $5bn over the quarter, according to Boodry’s estimates.

“Everyone could see what has happened to the public side of the portfolio and how the sell-off in the tech stocks has impacted SoftBank, with many companies trading below their IPO prices,” said Justin Tang, the head of Asian research at United First Partners in Singapore.

“But what’s also worth noting is that the still-unlisted private SoftBank companies are having their valuations marked down, too.”

As shares in companies held by SoftBank’s Vision Fund plummeted during the global tech rout, the Financial Times reported that Son told executives to slow down investments and expressed alarm over his personal borrowings against SoftBank shares.

Investors said that in addition to the threat of sustained disruptive zero-Covid policies in China, the war in Ukraine and rising rates meant the Vision Fund would struggle to list many companies in its portfolio.

SoftBank’s Vision Fund, a $100bn investment vehicle launched in 2017 and backed by Saudi Arabia and Abu Dhabi, was intended to be the first in a string of funds run by SoftBank’s investment arm.

Its image was tarnished after some of its high-profile bets imploded, including one on office-sharing group WeWork. For its second Vision Fund, announced in 2019, SoftBank failed to raise outside money.

SoftBank is heavily exposed to the crackdown on tech in China, with a 25 per cent stake in Alibaba, the ecommerce group owned by Jack Ma that has come under increasing pressure from regulators.

While Alibaba shares recovered towards the end of the quarter after a steep sell-off in mid-March, they are still down about 30 per cent in the year-to-date.

Other tech funds have suffered steep losses, including Tiger Global, which has lost about $17bn this year, marking one of the biggest dollar declines for a hedge fund in history.

“SoftBank’s entire business structure is dependent on one key assumption and that is ever-rising stock prices, more specifically in growth names that are leading the current market sell-off,” said Amir Anvarzadeh of Asymmetric Advisors in a note recommending investors short the stock.

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