In 2016, the SoftBank Vision Fund came into existence. With $100 billion in capital, it was the world’s biggest tech-focused investment fund. The company launched SoftBank Vision Fund 2 in 2019.
However, with the year ending March 31, the Vision Fund has lost sight of profits and posted a loss of about $20.5 billion. In comparison, the previous year, the SoftBank Vision Fund had amassed a profit of nearly $31.25 billion.
SoftBank under Masayoshi Son
The SoftBank Group CEO Masayoshi Son has been hailed a tech genius. His smart investments, including the one in Alibaba founded by his friend Jack Ma, have earned great returns over the years.
The SoftBank Vision Fund investments are meant for startups that catch the eagle eye of the seasoned businessman. Fourteen of the start-ups that SoftBank invested in made it to the CNBC Disruptor 50 List in 2019. Son’s interest in startups have also increased competition amongst venture capital firms in the Silicon Valley. Others VCs have either upped their game or dropped out of deals entirely. His investments have also increased valuations of many pre-IPO companies.
The world’s largest tech fund had already deployed close to $80 billion of its capital by 2019. A close competitor of the SoftBank Vision Fund investments is Saudi Arabia’s Crown Prince Mohammad Bin Salman’s sovereign wealth fund. At the time, Son had shared his vision saying, “Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector. We will further accelerate the Information Revolution by contributing to its development.”
As of 2019, its portfolio consisted of over 80 companies. In 2021, it recorded the highest quarterly profit by a Japanese company.
This year, many of its tech-companies that traded at high valuations have lost their luster and turned into the biggest drags.
A Record Loss
The Japanese investment company blamed its losses on “a decline in the share price of most listed portfolio companies” due to an “avoidance of high-growth technology stocks in anticipation of higher interest rates.”
SoftBank had invested heavily in the office-sharing start-up WeWork Inc. Plagued by scandals and controversies, WeWork was forced to shut shop in 2019. Once touted to be a great disruptor, its shocking collapse resulted in investor wariness surrounding this particular business model. The Japanese company lost over 90% of its $10.3 billion investment after WeWork did not work.
The world’s largest tech fund also lost money on British finance firm Greensill capital. SoftBank could not see any greens come their way as the controversial firm filed for insolvency in March 2021, tanking the Japanese firm’s $1.5 billion investment.
Recently, SoftBank’s plan to sell chip-maker Arm to Nvidia for $66 billion was cancelled as it did not receive the required approvals from the US and European regulators. The VC is currently planning a $60 billion IPO for Arm Ltd. Arm’s chip technology powers over 95% of the world’s smartphones and seemed like a sure bet at the time.
Never one to back down from a challenge, Son said about the recent loss, “in terms of personality, I do like to play offense. Now is the time for SoftBank to be defensive.”
SoftBank shares have dropped close to 17% since the start of the year.
The tech stocks crash this year has affected the giants of the world. Alphabet Inc, Apple, Amazon, Meta, and Microsoft have seen their stocks plunge downward. Meta has lost the most in terms of percentages with a loss of almost 38%. From geopolitical instability to privacy measures instituted by Apple, various factors have caused tech stocks have put up a lackluster performance. Cryptocurrency, too, continued to fall across the world. Experts say that investor sentiment in the Silicon Valley has hit new lows since the dot-com crash.
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