Dive Brief:

• Japanese bank SoftBank reported an overall $23 billion loss for the company, a record quarterly loss for the bank and one that was largely driven due to depressions in its Vision Fund Unit. The funds act as the bank’s investment arm.
• The company’s Vision Fund Unit hemorrhaged money in the face of persistent inflation and subsequent moves to bump up interest rates, which has sent global technology stocks slumping in value.
• The earnings have put SoftBank in “defense mode,” CEO Masayoshi Son said in prepared remarks Monday.

Dive Insight:

Son, during the bank’s earnings presentation per a translator, pointed to turmoil in the global stock market as well as the fall of yen as two of the factors that contributed to the loss, noting that due to the “huge investment valuation loss we recorded for new investments, we have a heightened investment discipline.” 

“We have a vision, and the vision remains the same. But if we pursue the vision recklessly, we may end up losing big,” Son said.

The Vision Funds serve as SoftBank’s startup investment arm, with the financial entity making high-profile investments in technology and fintech startups such as Uber, Klarna and, infamously, WeWork, with the bank funneling upwards of $17 billion into the coworking company.

Such companies have suffered various setbacks as global tech valuations plummet, with buy now, pay later firm Klarna seeing its valuation nosedive 85% to $6.7 billion from the $46 billion it was valued in 2021, according to a July 11 report from Reuters.

SoftBank has retooled its investment strategy for its second Vision Fund — which, with approximately $56 billion in available venture capital, is also about half the size of the bank’s first $100 billion such fund. The bank is now approaching its investments more systematically, with smaller ticket sizes than its first fund, going for the “first base hit or second base hit” rather than aiming for the home run, Son said during the earnings presentation.  

The bank has taken aggressive steps to cut costs following such results, reportedly raising $10.5 billion in capital as well as additional $6.8 billion by leveraging its shares in Chinese e-commerce company Alibaba via prepaid forward contracts — gaining cash from lenders in exchange for the promise of returning either cash or Alibaba shares at a later date, per a Monday report by the Wall Street Journal.

The company also sold off its entire stake in ride-sharing company Uber, garnering a $1.7 billion profit from its original 2018 investment in the company from these sales.