SoftBank Reported Its Biggest Annual Loss Ever

SoftBank Reported Its Biggest Annual Loss Ever

almost 4 years ago2 mins

Japan’s SoftBank had some making up to do on Monday after the tech-focused conglomerate reported its biggest annual loss in history 📉

What does this mean?

SoftBank’s $13 billion shortfall was down to one main culprit: its giant Saudi-backed Vision Fund, which lost a devastating $18 billion. Its portfolio of 88 startups is heavily weighted toward the sharing economy, and most of those companies have been hit particularly hard by the coronavirus-induced global downturn. Just look at ride-hailing giant Uber and coworking space provider WeWork, which between them are responsible for more than half the Vision Fund’s total loss 🚘🏢 The former’s stock, after all, is still trading below its initial public offering price, while the latter has seen its value drop more than 90% from its peak. Bet SoftBank’s regretting the $10 billion it piled into the coworking company right about now…

Source: The Wall Street Journal
Source: The Wall Street Journal

Why should I care?

For the first time since SoftBank listed on the stock market over 25 years ago, the company warned investors it may not pay a dividend this year. Instead, the company plans to spend more than $20 billion – financed by selling its stake in Chinese ecommerce group Alibaba – on buying back its own shares to help prop up their price 🤔 And at least one company will be happy with that announcement: activist investor Elliott Management – which has a $3 billion stake in SoftBank – has been pushing the company to increase share buybacks and boost transparency around how it values its portfolio of startups.

Yes, this is a genuine slide from Softbank's presentation
Yes, this is a genuine slide from Softbank's presentation

SoftBank is going all in both on the digitization of the new economy and – like several others in industries from healthcare to banks – on growth outside its home country. And that might be a smart strategy: data out on Monday showed Japan, the world’s third-largest economy, shrank by 0.9% last quarter – the second consecutive quarter of economic decline, which is the hallmark of an official recession 🇯🇵

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