SoftBank swings to Q2 profit but unveils more Vision Fund pain with FTX writedown

SoftBank swings to Q2 profit but unveils more Vision Fund pain with FTX writedown
© Reuters. FILE PHOTO: The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017. REUTERS/Issei Kato

By Kiyoshi Takenaka

TOKYO (Reuters) -Japan’s SoftBank Group Corp reported its first quarterly profit in three quarters, buoyed by the sale of some of its stake in China’s Alibaba (NYSE:BABA) even as its massive Vision Fund unit posted another heavy quarterly loss.

The sprawling Vision Fund, which upended the world of technology with its big bets on startups, will also write down its investments in troubled crypto exchange FTX to zero, a source close to SoftBank said. The source said those investments amounted to less than $100 million.

The complications at FTX mark the latest difficulty for Vision Fund, which has been hammered in recent quarters by a global tech rout, prompting SoftBank Chief Executive Masayoshi Son to sharply scale back fresh investments.

The source said bailing out FTX, which was valued at $32 billion in January but is now scrambling to raise about $9.4 billion, would be a question for larger investors, as the tech conglomerate retrenches to cut costs and refocuses on managing its existing portfolio.

Vision Fund plans to cut staff by more than 30%, its chief financial officer Navneet Govil told analysts on Friday.

Vision Fund’s investment losses were 1.38 trillion yen ($9.75 billion) in the three months to September 30 as the value of its portfolio continued to slide. That brought the fund’s total cumulative investment loss to around $60 billion in the nine months to end-September.

Son told a briefing that this would be the last time he would speak at a post-earnings briefing for the “foreseeable future”, adding he had no health issues and would focus his additional time and energy on business opportunities related to British chip designer Arm.

“For at least the next few years, I plan to focus solely on Arm’s forthcoming explosive growth, while other (SoftBank) businesses will remain defensive,” Son said. “I’m good at offense by nature. I would like to focus on offense for Arm.”

Son has outlined plans to list Arm in the United States after the sale to Nvidia (NASDAQ:NVDA) collapsed, and the source close to the company said on Friday that the listing was unlikely to take place before the fiscal year ends in March 2023.

It still aims for an IPO sometime next year, Arm vice president Ian Thornton said.

SoftBank itself is synonymous with Son, who with his audacious bets on everything from Chinese tech to startups like WeWork has charted a very different course from any other Japanese company.

At SoftBank itself, net profit came to 3.03 trillion yen in the July-September second quarter. In the first quarter, the group had posted a 3.16 trillion yen loss.

Days after unveiling the massive first-quarter loss, SoftBank said it would reduce its Alibaba Group Holdings stake to around 15% from around 24% by settling prepaid forward contracts and book an estimated gain of 4.6 trillion yen in the second quarter.

In the latest quarter the value of some of SoftBank’s listed investments fell, including its stakes in U.S. real estate broker Compass and Indonesia’s biggest tech firm, GoTo, while South Korean e-commerce firm Coupang was among the gainers.

Shares in SoftBank closed 1.8% higher than they were trading prior to the earnings announcement, lagging a 3% rise in the broader market.

($1 = 141.5400 yen)

Source: Reuters