SoftBank CEO and founder Masayoshi Son has used his gift of gab to become one of the most charismatic celebrity investors around. On Thursday, the numbers did the talking for him, as Son was busy eating a fresh slice of humble pie.
Son’s brainchild, the SoftBank Vision Fund, a high-profile, high-flying investment arm, which focuses on generating high returns from high tech, has delivered a shocking $27 billion loss.
Carry on, Wayward Son
Founded in 2017, the $100 billion Vision Fund — two funds, technically: Vision Fund 1 and Vision Fund 2 — made pretty clear sense. Aided by his team of experts, Son, one of the world’s foremost tech investors, would put lots of cash into lots of firms with lots of potential for big returns. A who’s who of top business brands, including Microsoft, Apple, Standard Chartered, and Saudi Arabia’s Public Investment Fund, lined up as backers.
When the market was on fire last year, and interest rates were low, the strategy was gravy. SoftBank Vision Fund 1 alone had generated cumulative gross investment gains of $55 billion, distributing $22.3 billion to LPs as of March 31, 2021. And yet the hawkish Son failed to account for the likelihood of valuation-walloping global, such as Russia’s invasion of Ukraine exacerbating pandemic-caused supply-chain problems, which in turn exacerbated fast-rising inflation, which in turn exacerbated the rout of high-growth tech stocks. Knocked off his lofty perch, Son must now engineer a turnaround:
- Step one is to pull back, especially in China. Two of Vision’s biggest losers were Chinese tech giants: ride-hailing group Didi Chuxing (down 50% this year) and ecommerce giant Alibaba (down 30%). “It’s not that we won’t be investing in China at all as there are some great companies there, but we want to be investing smaller amounts,” he said Thursday.
- Step two is to keep the faith. “When it rains, you open an umbrella,” Son added, suggesting the current turmoil will pass. Of note, SoftBank plans to cash in on UK chip designer Arm Ltd. by taking it public in the aftermath of a $40 billion sale to NVIDIA that failed to materialize due to insurmountable regulatory obstacles.
Some of Vision’s investments are holding up. The $2.2 billion the fund put into South Korean ecommerce firm Coupang is still up $6 billion, despite shares falling 60% this year.
No Bald Fraud: SoftBank’s market value plummeted after the dot com boom, when it was similarly caught up in a tech rout, but Son has weathered the storm. “My nickname back then became the ‘bald fraud’,” he joked Thursday. “While it’s true that I’m balding, I believe I’m no charlatan.”