Tokyo - Japan's SoftBank Group reported an unexpected loss but indicated a tentative reentry into new investments, buoyed by its Vision Fund unit's return to profitability for the first time in six quarters.
The Vision Fund unit marked an investment gain of approximately 160 billion yen ($1.1 billion) during the April-June period, primarily attributed to an augmented valuation of Arm, the chip designer anticipated to undergo an initial public offering later this year.
Excluding the boost from Arm, the situation appeared less optimistic, as SoftBank's Vision Funds collectively reported a combined loss of 13 billion yen.
Since May 2022, the investment conglomerate had adopted a "defense mode" strategy, responding to the crash in tech valuations resulting from surging interest rates and global banking sector uncertainties. However, in June, Founder and CEO Masayoshi Son announced intentions to shift towards an "offense" mode, capitalizing on the excitement surrounding advancements in artificial intelligence.
This shift was evident in the first-quarter results, with Chief Financial Officer Yoshimitsu Goto stating to reporters on Tuesday that the company was taking a cautious step into selective new investments.
During the quarter, SoftBank engaged in investments totaling $1.8 billion, marking a departure from its scaled-back investments of approximately $500 million over the preceding three quarters.
"The criteria for investment are quite stringent," noted Navneet Govil, the Finance Chief of the Vision Fund. "We are seeking companies that prioritize next-generation AI and exhibit significant growth potential."
During this period, the unit divested approximately $890 million in holdings, encompassing complete exits from three portfolio firms and partial exits from several publicly traded portfolio companies.
Following a series of prominent investment setbacks, notably the case of WeWork, whose shares plummeted by 98% since its public listing in October 2021, Son has adopted a more cautious approach to investment.
The Vision Fund unit implemented staff reductions in the recently concluded quarter, as confirmed by Govil.
Although there were previous indications that up to 30% of the unit's workforce could face layoffs, Govil refrained from specifying a number, yet stated that the unit's staffing had been adjusted to an appropriate level.
On the whole, SoftBank disclosed its third consecutive quarterly loss, attributed to diminished valuations of significant investments like Alibaba Group, Deutsche Telekom, and T-Mobile U.S.
The net loss tallied up to 477.6 billion yen ($3.3 billion), a significant decrease compared to the 3.16 trillion-yen loss recorded in the same period the previous year. However, this result starkly contrasted market projections of a net profit of 75 billion yen.
Following the collapse of its deal to sell chip designer Arm to Nvidia Corp due to objections from U.S. and European antitrust regulators, SoftBank has been striving to arrange a listing for Arm. Although Goto didn't disclose details about the listing's timing or fundraising target, he did mention that preparations were proceeding "very smoothly." Reportedly, the planned U.S. listing has the potential to raise between $8 billion and $10 billion.