SoftBank Group quarterly profit wiped out by Vision Fund losses

By Sam Nussey

TOKYO (Reuters) – Japan’s SoftBank Group Corp said on Wednesday its third-quarter operating profit fell 99%, well short of analyst estimates, pulled down by a second consecutive quarter of losses at the $100 billion Vision Fund.

The Vision Fund posted an operating loss of 225 billion yen ($2.05 billion) for October-December compared to 176 billion yen profit in the same period a year earlier.

The poor performance of SoftBank’s tech investments come as Chief Executive Masayoshi Son is struggling to attract outside capital for a successor to the Vision Fund, which has Saudi Arabia and Abu Dhabi as its anchor investors.

The Vision Fund said it had invested $74.6 billion in 88 companies as at the end of December, and that those investments were worth $79.8 billion by year-end.

Profit for the overall group reached 2.6 billion yen for the quarter versus 438 billion yen a year prior, the technology investor said in a stock exchange filing.

The result compared with the 345 billion yen average of three analyst estimates compiled by Refinitiv.

Analysts said it is difficult to evaluate SoftBank’s performance due to a lack of disclosure around Vision Fund’s internal valuations.

Son’s investing credentials took a hit in the August-September quarter when the fund was whiplashed by weakness at major bets such as office space-sharing firm WeWork and recorded an $8.9 billion operating loss.

Since then a slew of portfolio companies – from hotel-booking platform Oyo to cloud robotics firm CloudMinds – have cut jobs and come under pressure to demonstrate the long-term viability of their business models.

The fund itself has also been losing key employees.

On Wednesday, SoftBank’s shares surged to their highest price in seven months, buoyed by news that a U.S. federal judge had rejected an antitrust challenge to the proposed takeover of subsidiary Sprint Corp by T-Mobile US (NASDAQ:) Inc.

Nevertheless, SoftBank faces pressure to enhance shareholder value after sources told Reuters last week that U.S. activist hedge fund Elliott Management had amassed a stake of almost $3 billion in the tech conglomerate and is pushing for change including $20 billion in stock buybacks.

SoftBank also said it recorded a 332 billion yen dilution gain related to its stake in Alibaba (NYSE:) Group Holding Ltd following the Chinese e-commerce giant’s secondary listing in Hong Kong in November.

Son will speak at a news conference from 0700 GMT.

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