Money & Banking

SoftBank’s Q3 operating profit plunges 99%, weighed down by Vision Fund losses

Prashasti Awasthi Mumbai | Updated on February 12, 2020 Published on February 12, 2020

The fund has invested in troubled tech companies such as Oyo, Uber and WeWork

Japanese conglomerate SoftBank has witnessed a 99 per cent decline in operating profit for the third quarter ended December 2019.

The group's Vision Fund posted an operating loss of 225 billion yen ($2.05 billion) for the quarter, compared with a 176 billion yen profit in the same period a year earlier, said Reuters.

The results failed to cheer distressed investors, as the profit was less than one-tenth of what it had posted in the year-ago period.

Investee distress

Media reports attributed the substantial fall in profit to SoftBank-backed companies – including Uber, Oyo and WeWork – seeing a setback in their businesses.

The Japanese company had used its $100-billion Vision Fund, the world’s largest technology-focussed venture-capital fund, to make investments in tech companies. From pushing artificial intelligence to establishing ride-hailing aggregators, Vision Fund had always come to SoftBank’s rescue.

However, according to a CNN Business report, the fund was what hurt Masayoshi Son’s SoftBank in the December quarter. The Vision Fund and a related fund reported an operating loss of 225 billion yen ($2 billion) for the quarter. Vision Fund blamed the unrealised losses on WeWork and Uber.

Spring, T-Mobile merger

The balance-sheet report came hours after a US court cleared the merger of T-Mobile and Sprint, the US carrier SoftBank acquired nearly a decade ago.

According to a CNN Business analytical report, Sprint has not yielded good results. Even when Son tried to revamp the company, it did not create much value for SoftBank. Offloading Sprint would remove some $44 billion of debt from SoftBank's books.

Established in 1981, SoftBank rapidly emerged as a global leader in the technology world. It nurtured numerous creative start-ups across the globe, including Oyo and Uber. However, the company’s graph soon went down after investing in companies led by young CEOs.

Oyo had to retract its services from more than 200 cities in 2019. The major shock to SoftBank came last October, when American start-up WeWork, which provided shared workspaces for technology start-ups, collapsed. WeWork had been in turmoil since it filed for an IPO last August. The co-working start-up cut its valuation down from $47 billion to $10 billion.

After the two major setbacks, SoftBank reported a $6.5-billion loss in the September quarter, its first quarterly loss in 14 years.

Published on February 12, 2020
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