An investor walks out of the Uber IPO roadshow with documents in hand at a hotel in Manhattan, New York, New York, US, on April 30, 2019. File photo: REUTERS/JEENAH MOON
An investor walks out of the Uber IPO roadshow with documents in hand at a hotel in Manhattan, New York, New York, US, on April 30, 2019. File photo: REUTERS/JEENAH MOON

Tokyo — Japan’s SoftBank Group reported a stunning $18bn loss at its giant Vision Fund, pushing Masayoshi Son’s conglomerate to a record loss and highlighting the deepening crisis at its portfolio of companies from the global downturn.

The disastrous ¥1.9-trillion operating shortfall at the Saudi-backed Vision Fund, including losses of almost $10bn at office-sharing firm WeWork and ride-hailing app Uber Technologies alone, left SoftBank with its worst annual loss of ¥1.4-trillion.

Son, who is under pressure from US activist hedge fund Elliott Management to increase share buybacks and governance, said SoftBank would raise ¥1.25-trillion for buybacks using its stake in China’s Alibaba Group.

“The coronavirus is an unprecedented crisis,” a notably downbeat Son told an earnings presentation, comparing it to the Great Depression.

It was a far cry from his characteristic ebullience.

The Vision Fund’s $75bn investment in 88 start-ups was worth $69.6bn at the end of March. The $100bn fund had already delivered two consecutive quarters of losses before being upended by the coronavirus outbreak.

SoftBank booked a $7.5bn loss on other tech investments, which it attributed primarily to the economic shock caused by the virus. The outbreak has worsened underlying problems at many of its bets on unproven start-ups.

It provided scant detail on which companies saw writedowns but offered a sector breakdown showing investments in construction and real estate were worth less than half of cost price, with flagship transport investments also underwater.

SoftBank has leveraged its investments to supply further funding for other investments — a strategy that has come under strain as valuations tumble — with losses larger than the group’s revised estimate from just last month.

SoftBank-backed satellite operator OneWeb filed for bankruptcy in late March, adding to an impairment loss for investments held outside the Vision Fund that also include part of the stake in WeWork.

The group pointed to further pain to come, saying “uncertainty in its investment business will remain over the next fiscal year” if the pandemic continues.

The turmoil has given leverage to shareholder Elliott Management, which in addition to recommending share buybacks is pushing for greater transparency and oversight. The demands echo critics who argue SoftBank is dominated by Son and offers little transparency on how the valuations that drive its profit are reached.

The group has pledged the sale or monetisation of $41bn in assets, in part to finance a ¥2.5-trillion buyback to prop up its share price. By the end of April it had spent ¥250bn on share purchases.

At the same time, the company is loosening ties with Alibaba Group, the largest asset in its portfolio, with the Chinese e-commerce major’s co-founder, Jack Ma, departing the SoftBank board.

Reuters