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Hard times at SoftBank Group - USD 27 billion loss

SoftBank Group CEO Masayoshi Son opened the latest financial results presentation with a single word: "Defensive".

Softbank has decided to invest less. This is in response to the historic losses of USD 27 billion in the "Vision Fund", which has invested in around 450 companies. The figures for the current quarter do not look good either.

The shares first fell from USD 18.20 to USD 16.95 on Thursday 12 May 2022, but then rebounded to USD 19.76 on Friday 13 May 2022.

SoftBank is under pressure from rising interest rates almost worldwide. Softbank is also invested in Chinese tech companies such as Alibaba and mobility app Didi and South Korean e-commerce platform Coupang, which has lost more than 50% of its value since going public.

Son, who likes to present himself as positive and as a visionary with a long investment horizon, was unusually pragmatic and fact-based in a sombre presentation. Right at the beginning, for example, Son made it clear that the markets were currently confused, not least because of the geopolitical situation involving Ukraine.

Son paid particular attention to Softbank's debt burden. If the performance of the companies in the funds is weak, the high debt burden can put the company in severe distress. He sees the company's debt burden as "manageable" and promises to take an even stronger defensive position.

Investments in Chinese companies, especially Alibaba, have proved difficult because of the Chinese state's strong intervention in the market. Softbank has reduced its position in the online retailer to minimise risk, but it is also reluctant to make new investments.

SoftBank owns 25% of Alibaba and the stock has already fallen from USD 137.41 at the beginning of 2022 to as low as USD 76.76 in mid-March. In October 2020, Alibaba's share price was as high as USD 304.69, more than three times its low in March.

This does not currently look like a successful vision that Son is pursuing in his investments. Worse, if the company lacks capital to invest in new companies, it will have to rely on the performance of its existing investments and, with its defensive stance, will have less room to improve the group's performance.

A key ace up Son's sleeve is the British microchip company Arm. At first Son wanted to sell the company to chipmaker Nvidia. That did not work out. Another option would be an IPO on the American technology exchange Nasdaq. This was not possible until now because no auditor was able to audit Arm in China due to Corona. This should soon be possible again and pave the way for an IPO.

Please note that the presented content refers to the Oval group which contains two legal entities: Monecor (London) Limited authorised and regulated by the UK Financial Conduct Authority (FCA) with Financial Services register number 124721. Monecor (Europe) Limited authorised and licensed under the Cyprus Securities and Exchange Commission (‘CySEC’) with license number 096/08.