Softbank Funds Post $27 Billion Loss

The news has gone from bad to worse for SoftBank.

The Japanese conglomerate said on Thursday that it had lost about $27 billion in its two Vision Funds for the year that ended in March, as many of the major tech companies it invests in have struggled under rising inflation, concerns about Covid lockdowns in China and broad weakness in global equity markets.

That has deepened the troubles for SoftBank, which this year has contended with the acrimonious departure of a key executive and the derailment of its planned $40 billion sale of the chip designer ARM over regulatory concerns. Its huge holdings in the Chinese online shopping giant Alibaba have also plummeted in value amid continuing investor caution about Beijing’s crackdown on internet firms.

SoftBank lost $13.2 billion as a whole for the fiscal year, the latest sign of its severe change in fortunes just a year after it announced that it had earned more money in one quarter than any Japanese company in history.

The firm’s eccentric founder, Masayoshi Son, has for years grabbed headlines for eye-popping purchases as he transformed SoftBank into a holding company for tech firms that seemed set to boom. But those big bets have collapsed; the grab bag of big-name start-ups the company staked its future on have performed poorly in recent months.

During a news conference, Mr. Son offered a rare note of caution, saying that SoftBank would take a “defensive position” in which it is more selective in its investments, as Covid and then Russia’s invasion of Ukraine have left the world “in chaos.”

SoftBank, whose Vision Funds include holdings in more than 400 companies, has sought to reduce its exposure to China, decreasing new investments there as economists have warned that strict Covid measures are likely to have a lingering impact on economic growth. Mr. Son acknowledged that the firm had been too reliant on Alibaba, but said it was already well into the process of diversifying.

“In the past two years, actually, we’ve been receiving quite a large impact from China’s situation,” he said. “But for the future, because we have reduced the China dependency in our portfolio, we believe we don’t have to worry too much about the situation in China.”

Alongside SoftBank’s stake in Alibaba, many of Mr. Son’s other biggest investments have slumped this year, as investors have sold off shares in U.S. tech firms, and China’s regulatory crackdown has persisted.

SoftBank’s investments in companies like the Chinese ride-hailing app Didi Global and the South Korean e-commerce firm Coupang have soured. Both of those companies have seen their value roughly halved amid the recent market turbulence.

Even so, much of SoftBank’s losses are on paper only, and Mr. Son sought to highlight returns it expects to realize from ARM, the British chip design firm. He said that the final obstacle for an initial public offering for ARM had been cleared when it was able to regain control of its China unit from a rogue executive who had refused to step down.

Still, Mr. Son cautioned that SoftBank had no firm deadline to list ARM, noting that if the markets remained weak and investor sentiment negative, the initial public offering could be delayed between three and six months.

In anticipation of a difficult earnings report, SoftBank’s shares fell roughly 8 percent in Thursday trading. Mr. Son, while acknowledging the headwinds, has also sought to strike an upbeat outlook, arguing that investments in next-generation technologies like artificial intelligence will eventually pay off.

He argued that the dip in SoftBank shares offered a discount and said the company was about 40 percent of the way through a share buyback of 1 trillion yen, or $7.8 billion.

“I am confident about the future of our business,” he said.