August 16, 2022

Japan’s SoftBank Group CEO Masayoshi Son attends a press conference in Tokyo, Japan, November 5, 2018. REUTERS/Kim Kyung-Hoon/File Photo

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  • The loss of the general portfolio of the Vision Fund in the first quarter may exceed 10 billion dollars
  • Special writedowns are unlikely to reflect market weakness – analyst
  • Group financing options restricted amid portfolio decline
  • SoftBank has completed more than 60% of the buyback program

TOKYO (Reuters) – Declining valuations in the listed portfolio of SoftBank Group Corp.’s Vision Fund unit (9984.T) signaled more pain for Chief Executive Masayoshi Son when the group reported April-June earnings on Monday as nervousness Investors regarding high-growth companies that he prefers.

Redex Research analyst Kirk Boodry estimated that the loss of the overall portfolio of Vision Fund in the first quarter could exceed $10 billion, following declines in robotics company AutoStore Holdings Ltd (AUTO.OL), e-commerce company Coupang Inc and artificial intelligence company SenseTime Group Inc (0020). HK), whose shares fell by nearly half on the last day of June.

While there is limited visibility on Vision Fund’s private portfolio valuations, value writedowns have contributed to the Vision Fund’s record $26 billion loss reported in May as investor concern about the prospects for high-growth stocks feeds into private markets.

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The extent of the revaluation was underlined when Swedish payments company Klarna last month raised capital with a valuation 85% lower than SoftBank-led funding over the previous year.

Atul Goyal, analyst at Jefferies, said writedowns in the private portfolio were unlikely to reflect the current weakness in valuations in the market.

CEO Son was quickly investing through his second Vision fund, in which he holds a personal stake, but vowed in May to “play on defense” and rein in spending amid market turmoil caused by high interest rates and political instability.

The 64-year-old billionaire previously incurred personal losses betting on publicly traded derivatives and stocks through the trading arm of SB Northstar, which has since been shuttered.

The uncertainty in the technology conglomerate is compounded by the departure of a string of Son aides. Rajiv Misra, the lead architect of SoftBank’s push to invest in late-stage startups, has stepped back from managing Vision Fund 2 to launch his own fund.

The cost of insuring against a default on SoftBank’s debt and bond yields remains high, albeit at last month’s highs, and analysts point to the group’s restricted financing options given the portfolio’s weakness. Read more

“Within the Vision fund itself, in general holdings, they really don’t have a lot of options,” said Redex Research’s Bodry.

SoftBank relied on its large and liquid stake in e-commerce company Alibaba Group Holding Ltd (9988.HK) for financing. The Financial Times estimated that the group has now raised up to $22 billion using shares.

The group is targeting an initial public offering of chip designer Arm in the United States after the collapse of a sale to Nvidia Corp (NVDA.O), but analysts are questioning prospects for the listing.

SoftBank launched a 1 trillion yen ($7.5 billion) buyback last November, to support shares that have fallen by nearly half from their March 2021 highs, but have used more than 60% of capital by late June.

(dollar = 134.1600 yen)

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(Reporting by Sam Nossi) Editing by Christopher Cushing

Our criteria: Thomson Reuters Trust Principles.

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