The best way to make up for a hole is to create a larger hole.
According to media reports, SoftBank is considering using its own cash to set up a third SoftBank Vision Fund, and also considering injecting more funds into the second Vision Fund, and a decision will be made in the next few months.
Regarding the news of the establishment of the third Vision Fund, market relevant personnel said that they were very puzzled. Why not invest more energy in the first and second phases of the Vision Fund?
Previously, Bloomberg reported that SoftBank's Vision Fund plans to lay off 20% of its employees worldwide, or about 100 people, mainly involving regions including the United States, the United Kingdom and China.
According to relevant information, before the layoffs, Japan's executive vice president Rajeev Misra had announced his resignation. What's more serious is that SoftBank had previously lost many core executives. The specific reason for this phenomenon is the losses caused by SoftBank's large investment.
As early as early August, SoftBank released its financial data for the first quarter of 2022 (April-June). The financial report showed that SoftBank's net loss in the first quarter was 3.16 trillion yen, which directly set the largest loss record for SoftBank in a single quarter. SoftBank lost 2.1 trillion yen in the last quarter.
Facing the problems faced by SoftBank, Masayoshi Son previously said in an interview that the company is currently in a "blizzard". At the same time, he also admitted that he felt ashamed of his past greed for violence.
In fact, I don’t think this is entirely blamed by Masayoshi Son. There is a saying in the capital market that profits and losses are the same. The huge returns earned on Yahoo and Alibaba are likely to make people depend on the path, and Masayoshi Son’s initial idea of establishing Vision Fund is also fine.
Under the background of global innovation at that time, the huge trend in the travel field excited many investors. But the subsequent epidemic combined with global economic changes has brought this to an abrupt end. SoftBank has made a big move in recent years. Companies with larger global travel have basically invested. A typical representative is Uber. In order to get more shares, Masayoshi Son once "threatened" the founder of Uber. But what was wrong was that it also prompted it to cash out at a high level and leave the mess to SoftBank.
Secondly, another mistake in Vision Fund is its judgment on the shared space. At that time, Masayoshi Son made the same investment in WeWork, and in the end, the founder of WeWork also threw the company to SoftBank. The losses from these two investments also directly led to the huge losses of Vision Fund.
In order to make up for the losses of Vision Fund, the fastest way Son could think of is to cash out the stocks of Alibaba and other listed companies. In fact, when SoftBank had problems in 2016, Son did the same, and in recent years, it has increased its sales efforts. After the release of this quarter's financial report, SoftBank announced the sale of Alibaba's shares within two days.
According to SoftBank's selling plan, SoftBank will settle forward contracts of up to 242 million Alibaba ADR in advance, with a total transaction income of 4.6 trillion yen (approximately US$34 billion). After the settlement is completed, SoftBank's shares in Alibaba will drop from 23.7% to about 14.6%. According to statistics, SoftBank has reduced its holdings of Alibaba from more than 30% to 14.6% in less than five years, and it may continue to reduce its holdings in the future, which is also one of the reasons why Alibaba's stock price is under pressure.
In addition, SoftBank’s Vision Fund both phases suffered huge losses. Under such losses, if SoftBank wants to issue a new fund, it is conceivable that the data shows that Vision Fund held a total of 80 investments in the first phase (excluding exited), with an investment cost of US$68.1 billion, an investment return of only US$66.3 billion, and a Vision Fund held 269 investments in the second phase, with a total cost of US$48.2 billion, and a cumulative investment return of only US$37.2 billion.
It is worth noting that in the case of unfavorable fundraising of Vision Phase II fund, most of its funds come from SoftBank itself. Therefore, if SoftBank raises the third phase of the fund, I think it is likely that it will be completed by its own main investment.
Overall, SoftBank itself is not stable at the moment. In a changing economic environment, shrinking the scale of investment and trying to preserve its strength is the most important thing. If Masayoshi Son insists on his own, the SoftBank system may collapse completely in the future.
