Son blamed the ongoing pandemic for the losses, saying that some of his tech investments had fallen “into the valley of the coronavirus”. He noted that of the 88 startups his fund had backed, 15 were teetering on the brink of bankruptcy. But he also stressed his belief that the fund would be rescued by a separate set of 15 investments, which he said would eventually account for 90% of the portfolio.
The Vision Fund recorded an operating shortfall of some 1.9 trillion yen, or $18 billion, largely due to poor performances from hotel-booking service Oyo and ride-hailing app Uber. But the fund was also sunk by a massive investment in New York based office-sharing business WeWork, which came well before the pandemic. Son has since admitted that the play was “wrong.”
Softbank looks set for another rough financial year, as its existing debt load, along with 7% interest payments to the Vision Fund’s Middle Eastern investors, will be a heavy burden on profits.
Furthermore, the Vision Fund may incur further losses as a result of the ongoing pandemic. Son seems to recognize this reality, and has so far avoided setting a dividend target for the fiscal year, noting that “uncertainty remains in our investment business.”
In an effort to avoid further crisis, the firm says it will boost its funds by selling or monetizing $41 billion worth in assets. It has already raised $11.7 billion by selling its shares in Chinese tech giant Alibaba, and media reports say the firm is in talks to sell its stake in T-Mobile US for $20 billion. The company has also announced it is planning to sell 5% of its domestic wireless carrier, which is Japan’s third largest cellular network.
But even if these moves are successful in reducing debts, the loss in assets will make it difficult for Softbank to implement any sort of growth strategy in the near future. Son had been planning to create a second Vision Fund but it seems unlikely he will be able to raise the $100 billion this would require.
Son warns the damage caused by the pandemic could be similar in scale to what happened during the Great Depression, when the markets lost 90% of their value. If he is to guide his company through this crisis, he will need to once again brandish the renowned leadership credentials that have seen him become one of Japan’s most prominent business figures.