Son’s Vision Pays Off, Gambles Backfire

Ever gamble away $50 at the blackjack table? Well, here’s a story for you.

SoftBank Group’s Vision Fund, the world’s largest tech VC, posted its best quarter since it launched in 2017, earning $8 billion in profit. But that was offset by founder Masayoshi Son, who gambled away $2.7 billion to derivatives trading, leading the company’s asset management division to a $1 billion loss.

Someone pull this guy out of the casino.

Saved By An IPO Harvest

It takes some serious moxy to present your financials in front of a slide of a goose laying a golden egg with Tchaikovsky’s The Nutcracker March playing in the background. But that’s actually a thing Son did Monday.

Sidestepping his wildly unsuccessful and somewhat controversial foray into trading, he focussed on his company’s golden success stories.

  • The Vision Fund’s results are the culmination of a remarkable turnaround: in 2019 Softbank reported a record $12.7 billion annual loss after the fund made several bad bets, including pouring $18.5 billion into WeWork. Shares went into meltdown last March, but have since grown 240 per cent.
  • In the latest quarter, Softbank overall made $11.1 billion, largely on the strength of the Vision Fund.
  • Uber and DoorDash, two companies that have benefitted from food delivery uptick during the pandemic, were the primary drivers behind the latest returns. They, alongside previous investments in Alibaba Group Holding Ltd. and Yahoo!, are Son’s “golden eggs.”
  • “Investment is rhythm,” he said, perhaps an indirect reference to the fact that his was a little off with those trades.

Do Not Follow This North Star: The unit that Son set up to play the market and invest in tech stocks, dubbed SB Northstar, has now lost $5.5 billion since September. Son was outed as the infamous “Nasdaq whale” whose buying spree pushed the index up 60 per cent over the summer, only to lead to a popped bubble. Investors rebelled, and SoftBank quietly moved to wind down its derivatives strategy, with about 90 per cent of its contracts closed in December.


The Takeaway:

While SoftBank is giving up most of its tech bets, it will hold on to holdings in Silicon Valley titans Facebook and Amazon. Maybe it’s Son’s way of saying he should stick to golden eggs.

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