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99% Drop In Operating Profit Of Softbank Group In Q3 Due To Its Vision Fund

99% Drop In Operating Profit Of Softbank Group In Q3 Due To Its Vision Fund
Huge losses incurred by its $100 billion Vision Fund of SoftBank Group Corp resulted in the investment company’s third quarter operating profits dropping by a stupendous 99 per cent which was way below what the markets have been expecting.
During the quarter, a total loss of 225 billion yen or $2.05 billion was reported by the Vision Fund compared to a profit of 176 billion yen in the same period a year earlier.
The technology investor said in a stock exchange filing that for the company as a whole, the overall profit for the quarter reached 2.6 billion yen for October-December compared to the company reporting a profit of 438 billion yen in the same quarter a year earlier.
The average of the estimates of analysts polled by Refinitiv for the time period for SoftBank was at 345 billion yen.
As of the end of December, a total of $74.6 billion in 88 companies had been invested by it, the Vision Fund said, and those investments had reached a value of $79.8 billion by year-end.
Masayoshi Son, the founder and chief executive of SoftBank has in recent times striving to get investors to put in money for the Vision Fund and one that could also be the successor for the Fund. The anchor investors of the Fund are Saudi Arabia and Abu Dhabi.
The August-September quarter was bad period for Son's credentials as an investor as some of the major investments that had been made by the fund such as the one in the United States based space-sharing firm WeWork performed very badly resulting in an operating loss of $8.9 billion for SoftBank.
However, since then, there has been constant pressure from SoftBank on its portfolio companies that range from the hotel-booking platform Oyo to cloud robotics firm CloudMinds, to show the long-term viability of their business models and therefore those companies cut jobs and has taken other cost curtailing measures.
Some of its key employees have left the Fund itself.
However, news from the US that a federal judge had rejected an antitrust challenge to the proposed takeover of subsidiary Sprint Corp by T-Mobile US Inc, effectively allowing the merger, caused enthusiasm among investors which propelled the shares of SoftBank to surge to their highest values in seven months. SoftBank is an investor in the American companies.
Reports said that despite this, there is pressure on SoftBank to deliver better value to its shareholders as the US activist hedge fund Elliott Management had bought stocks in the investment company worth almost $3 billion and is the one who is pushing the company to bring in changes including a share buyback worth $20 billion.
At a briefing following the release of SoftBank earnings, Son said that the tide was turning in favour of SoftBank – pointing to the rise in stocks of the company following the green signal to the merger of Sprint and T-Mobile.
However, analysts have said that it is not possible to accurately evaluate the performance of SoftBank because there is very little disclosure of the internal valuations of its Vision Fund.

Christopher J. Mitchell

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