Daily Brief: SoftBank Follows Up One Record Quarterly Loss With Yet Another One

Daily Brief: SoftBank Follows Up One Record Quarterly Loss With Yet Another One

over 1 year ago3 mins

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Japanese conglomerate SoftBank reported a new biggest-ever quarterly loss on Monday.

What does this mean?

SoftBank’s Vision Fund business – which manages the world’s biggest tech-focused investment funds – continues to be pummeled by a sharp selloff in tech stocks on the back of rising interest rates. It posted a record $17.2 billion loss last quarter, caused by big drop-offs in the value of key holdings like DoorDash, Coupang, and SenseTime. That means the segment was largely responsible for SoftBank’s $23.4 billion total loss – its second record loss in a row.

Vision Fund returns

SoftBank’s shares barely budged after the news, probably because investors were already well aware that this was on the cards. So by now, they’re probably wondering what the point is: SoftBank’s share price is now close to where it was five years ago, before the Vision Fund even existed…

SoftBank stock

Why should I care?

The bigger picture: Keep it on the down-low.

SoftBank’s Vision Fund also holds big stakes in hundreds of unlisted tech startups. And while it’s much harder to value those investments, it doesn’t sound like things are going particularly well: SoftBank wrote down their values last quarter, after weak performances across the board and lower valuations in recent fundraising rounds. That’ll make it even harder for SoftBank to get out of this rut: it’s now less likely to list these firms on the stock market, which means it has less cash to plow into new investments.

Zooming in: Buy never, pay never.

Klarna is SoftBank’s problem in a nutshell: the buy-now-pay-later company – and member of SoftBank’s Vision Fund – saw its valuation slashed by 85% after its fundraising round last month, taking it from $46 billion to just $7 billion. That’s down to two big problems: customers saddled with debt are struggling with the “pay later” bit, while others are simply deciding not to “buy now” in the first place.

Klarna valuation

Keep reading for our next story...

Palantir Reported Worse-Than-Expected Results

Palantir image

Secretive analytics company Palantir announced a mixed set of quarterly results on Monday.

What does this mean?

On the face of it, Palantir had a good quarter: the company’s revenue grew a better-than-expected 26% last quarter from the same time last year. But dig a little deeper, and things start to come apart at the seams. First, the firm posted a surprise loss for the quarter, mainly because its investments in SPACs – the mid-pandemic fad into which it pumped more than $400 million last year – haven’t panned out. And second, its revenue outlook for this quarter fell short of estimates, which Palantir put down to the “lumpiness” and unpredictability of government contracts. But investors don’t want excuses, they want results: the firm’s share price fell 15% after the update, meaning it’s now dropped almost 50% this year.

Palantir stock
Source: Google Finance

Why should I care?

Zooming in: It should be Palantir’s moment.

Palantir’s international revenue – which makes up 40% of sales – barely grew at all last quarter, even as the firm has been trying to curry favor with European governments on the back of the Russian invasion. And sure, some of that was down to the strong dollar, which lowers the value of international sales when converted back to the US dollar. But it also suggests that Palantir’s sales approach – whether charm offensive or fear-mongering – hasn’t been working quite as well as it hoped.

Palantir revenue

The bigger picture: Palantir wants you.

Plenty of tech firms have said recently that they’re freezing hiring or cutting jobs, but not Palantir: it announced last week that it’s on track to increase headcount by about 25% by the end of the year, as it accelerates its pace of hiring to meet its ambitious sales goals. But since that’ll push its costs up even more, it remains to be seen if the extra sales will justify the investment…

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