Economy SoftBank’s second-quarter whiplashed by £6.9 billion loss in Vision Fund

SoftBank’s second-quarter whiplashed by £6.9 billion loss in Vision Fund

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Japan’s SoftBank Group Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, November 5, 2018.

SoftBank Group Corp (9984.T) reported its first quarterly loss in 14 years on Wednesday, with its giant Vision Fund suffering a 970 billion yen ($8.9 billion/£6.9 billion) loss on falling valuations of top tech bets such as WeWork and Uber.

The depth of the loss cast doubt on founder Masayoshi Son’s high-risk strategy of investing in cash-burning startups, as he is trying to raise a second massive investment fund.

The Japanese investment powerhouse posted an operating loss of 704 billion yen ($6.5 billion) in the July-September quarter compared to a 706 billion yen profit in the same period a year earlier and a 48 billion yen loss forecast by analysts.

Last month SoftBank was forced to spend more than $10 billion to bail out office-sharing startup WeWork after its IPO attempt flopped.

The fair value of SoftBank’s investment in WeWork decreased by $3.4 billion in the second quarter.

The Saudi Arabia-backed Vision Fund, which is run by ex-Deutsche Bank banker Rajeev Misra, has invested $70.7 billion in 88 companies at the end of September. Those investments are now worth $77.6 billion excluding exits, it said.

With increased market scrutiny over the path to profitability for many of its bets on unproven startups, SoftBank is struggling to take them to market – an essential step to unlock capital to keep its investment juggernaut growing.

The value of most of the fund’s listed investments, including Uber (UBER.N), Slack Technologies (WORK.N) and Guardant Health (GH.O) fell over the quarter.

At Uber that slide has continued as losses continue to mount and a post-IPO share lock-up ends, with its shares hitting new lows this week.

SoftBank’s investing activities are propped up by other pillars of Son’s empire including domestic telco SoftBank Corp (9434.T), which on Tuesday reported a 9% rise in second-quarter operating profit, beating estimates, buoyed by its cash-cow mobile business.

SoftBank did not release a forecast for the current business year, saying there were too many uncertain factors.

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