SoftBank Group Corp of Japan is expected to disclose a devastating loss at its Vision Fund investment unit on Thursday, according to analysts, after investors sold off the fund’s high-growth firms on concerns about their profits potential.

With the technology investor set to report full-year earnings, Masayoshi Son’s statements about his risk appetite in the face of rising interest rates and the crisis in Ukraine will be scrutinised.

SoftBank’s China IT assets have taken a hit, with shares in major portfolio companies DiDi Global Inc, Grab Holdings Ltd, and Coupang Inc falling in January-March.

According to analysts, the company is also likely to post losses on its unlisted portfolio as public market volatility flows through to private valuations.

“It’s hard to see that they can come out of this quarter without writing down private assets,” said Redex Research analyst Kirk Boodry, who expects Vision Fund to book its deepest-ever loss.

“They might do the same thing they did two years ago and just kitchen sink stuff because they know that markets have built in a bad quarter,” Boodry said.

The Vision Fund arm lost $8.9 billion in the second quarter before rebounding to make a $850 million profit in the third, thanks to gains in its private portfolio.

The $100 billion Vision Fund of the unit specialises in large bets on late-stage software businesses, many of whom have gone public but are now trading below their initial public offering prices.

SoftBank’s financial flexibility has been squeezed as the $50 billion Vision Fund 2 has invested lower sums due to high prices for private assets and competition from rivals such as Tiger Global, as well as dropping portfolio valuations.

The second fund has yet to catalyse an upward revaluation of SoftBank’s shares, which trade at a discount to the value of the group’s assets, due to a lack of visibility into its portfolio and underperformance of listed assets.

SoftBank is focusing on investing through Vision Fund and has shuttered its SB Northstar trading arm, which built up personal losses for Son with wagers on derivatives and publicly traded equities like Amazon.com Inc and Facebook, which is now Meta Platforms Inc.

“We believe investment returns from other funds were also weak, including the Latin American fund and SB Northstar,” Citigroup analyst Mitsunobu Tsuruo wrote in a client note.

SoftBank had roughly $35 billion in cash on hand at the end of December and had sold assets such as Coupang and T-Mobile US Inc. SoftBank’s shares have fallen 8 per cent year to far, despite a 1 trillion yen buyback programme.

Son’s investment in Alibaba Group Holding Ltd, the Chinese e-commerce firm, is now valued roughly $60 billion after losing nearly two-thirds of its value since late 2020.

Following the breakdown of a sale to Nvidia Corp in an initial public offering that may value the business at much to $60 billion, SoftBank is moving on with plans to float chip creator Arm, according to Reuters.

(Adapted from ChanelNewsAsia.com)

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