Why did Masayoshi Son say so? We can draw the answer from the financial report data. SoftBank's net loss in the quarter was 3.16 trillion yen (equivalent to about 158.2 billion yuan), which broke the largest single-quarter loss record just set in the last quarter in just three months.
Looking back then, Masayoshi Son founded SoftBank Group in Japan in 1981. Subsequently, SoftBank Group was listed in Japan in 1994. Friends in the technology industry may be familiar with SoftBank. It is a comprehensive venture capital company that is mainly committed to investing in the IT industry. At present, SoftBank has invested in more than 600 companies around the world and owns a majority stake in more than 300 major IT companies around the world, including Alibaba, which we are very familiar with. As early as 2003, SoftBank's total revenue exceeded 400 billion yen (equivalent to about 20 billion yuan). Why is such a tragic situation in such a company with strong strength?
record loss
First, let’s take a closer look at SoftBank’s first quarter financial report for the 2022 fiscal year. Data shows that SoftBank Group's net sales in the first quarter were 1.572 trillion yen (equivalent to approximately RMB 78.7 billion), an increase of 6.3% from 1.4791 trillion yen in the same period last year.
Although net sales showed positive growth compared with the same period last year, SoftBank's single-quarter losses once again set a new record, with a net loss attributable to shareholders of 3.1627 trillion yen, setting the highest in the group's history. As a reference, SoftBank achieved a net profit of 761.509 billion yen (equivalent to about 38.1 billion yuan) in the same period of 2021. Compared with this, SoftBank’s profit situation this year is really a bit tragic.
From SoftBank’s financial report, SoftBank Vision Fund is the “main force” of this loss. The Vision Fund was established by Masayoshi Son in 2016 and mainly involves the fields of artificial intelligence robots and semiconductor technology. The project achieved a net profit of 5 trillion yen in 2020. However, "potential stocks" are also at a loss. This Vision Fund caused a total investment loss of 2.9191 trillion yen (equivalent to approximately 145.95 billion yuan).
As for such a "tragic situation", Masayoshi Son said at the performance press conference that the current situation is actually more unsatisfactory than in June. At the same time, he also conducted a self-examination and admitted: "When we made huge profits, we were proud. I was ashamed of my greed for huge profits in the past."
Whose "pot" is?
Faced with huge losses, Masayoshi Son reflected on and attributed the losses to two major reasons. On the one hand, the US stock market fell sharply, and the Vision Fund's public shareholding index fell 31% in the second quarter. On the other hand, the yen fell, and the impact of the depreciation of the yen accounted for 25% of the group's losses in the current period. Official data shows that its highly anticipated Vision Fund lost 2.91 trillion yen, of which 631.4 billion yen was attributed to third-party interests; in addition, there were 820 billion yen (equivalent to about 41 billion yuan) of foreign exchange losses.
At this performance conference, Vision Fund was mentioned many times, and the unsatisfactory results were like a thorn plunged into the hearts of SoftBank and Masayoshi Son. The Vision Fund includes Phase I and Phase II, with a layout of 473 companies. Public information shows that SoftBank Vision Fund Phase I (SVF1) was established in 2016, and SoftBank Vision Fund Phase II (SVF2) was initiated in 2019. In terms of the loss caused, the two periods account for about half of each.
Specifically, SVF1 holds a total of 80 investments (excluding exits), including 23 listed companies. As global stock prices are on a downward trend, resulting in a decline in fair value, the unrealized valuation losses (net) of SVF1 listed portfolio companies totaled US$6.8 billion. What is more obvious is that stocks of DoorDash, a large American takeaway company, and Coupang, a large Korean e-commerce company, fell together, with DoorDash losing $1.6 billion and Coupang losing $2.37 billion.
SVF2 holds 269 investments. Compared with SVF1, SVF2 adopts the strategy of casting a wide net. However, such investment methods have not achieved good results.In addition to the sale of Beike shares to cash out $3 billion in the first quarter, SVF2 recorded unrealized valuation losses (net) of $9.8 billion. Among them, the stock prices of Norwegian warehousing robot companies AutoStore and WeWork fell significantly. In order to stop losses, Masayoshi Son completely stopped the business expansion of the second phase of the fund.
It should be noted that by the end of June 2022, SoftBank Vision’s two funds have not recovered (excluding withdrawal). SVF1 has an investment cost of US$68.1 billion, with an investment return of only US$66.3 billion; SVF2 has brought the total cost of the fund to US$48.2 billion, with a cumulative investment return of only US$37.2 billion.
"cutting the flesh" to recover the blood
In order to save the situation, Son said that he planned to implement comprehensive cost reduction measures on the group and its Vision Fund, and bluntly stated that "it will include laying off personnel, and I have made up my mind about this."
At the same time, he also adjusted the strategy of Vision Fund at this stage: increasing the standards for new investments, increasing the value of the current investment portfolio, and reducing operating costs. Although it will reduce expenses, we cannot give up on investment and will continue to use our own funds to pursue our goals.
In addition, SoftBank also chose to sell some investment companies' stocks to "recover blood". SoftBank said it plans to sell part or all 9% of its online personal finance company SoFi Technologies. In addition, in order to raise cash, SoftBank has cleared its stake in Uber, a US taxi giant.
written at the end
The investment environment is ever-changing. A "smartless" strategy like betting based on intuition alone cannot always win, or many betting will achieve better results. Anyway, Masayoshi Son has also learned a lesson from this year's huge losses, and it is worth looking forward to how SoftBank will take action in the future.
