SoftBank Bankruptcy Isn't Inevitable, Vision Fund Posts $21.6B Losses
Japanese conglomerate SoftBank is down — but is it out? Here’s where SoftBank’s woes stem from and whether the company will face bankruptcy.
Aug. 8 2022, Published 10:54 a.m. ET
Japanese multinational conglomerate and one of the world’s largest public companies, SoftBank (OTC: SFTBY) has posted serious losses on its Vision Fund, exited its entire Uber stake at a loss, and is preparing to cut jobs.
With all the turmoil it faces, will SoftBank go bankrupt? With numerous SoftBank investments ending in losses over the last few years, a restructuring wouldn't be a total surprise — but the firm will likely do everything in its power to avoid such an outcome.
SoftBank’s latest bad news: Vision Fund posts $21.6 billion in losses.
For SoftBank, the bad news just keeps coming. The latest has to do with the company’s Vision Fund, a venture capital fund that lost a staggering $21.6 billion in the fiscal first quarter.
The Vision Fund is built on a foundation of technology stocks, a sector that has experienced intense volatility YTD. The reported losses are the fund’s second-largest losses ever.
Overall, the Vision Fund’s losses contributed to a major company-wide net loss, juxtaposing a net profit the previous quarter and marking the biggest losses SoftBank has endured yet.
According to SoftBank CEO and founder Masayoshi Son, “The market and the world is in confusion.” As a result, the Vision Fund will be more conservative on its investments moving forward. SoftBank said that “the global downward trend in share prices due to growing concerns over economic recession driven by inflation and rising interest rates” are to blame.
SoftBank exits Uber and Alibaba.
SoftBank was able to increase its liquidity by $5.6 billion recently by selling entire stakes in certain positions. One such position was with Uber Technologies Inc. (UBER). SoftBank also sold Alibaba Group (BABA) via something called a forward contract, which is basically a non-standardized, customized version of a futures contract.
SoftBank’s troubles mount and job cuts are inevitable.
SoftBank reportedly plans to cut jobs at the Vision Fund arm. As investments in the Vision Fund slow to a crawl, the department’s workforce is poised to consolidate. According to Son, “We need to cut costs with no sacred areas.” This maneuver will be in addition to company-wide cost reductions.
In the previous fiscal quarter, SoftBank posted $27.4 billion in losses for its Vision Fund, which so far remains the largest loss yet. At the time, SoftBank assets fell on South Korean e-commerce company Coupang’s losses, embattled Chinese rideshare firm DiDi Global’s troubles, and more.
Prior to the fall of WeWork, SoftBank invested more than $10 billion in the company. Now, the Japanese firm continues to work to make up those losses, but it’s coming up short.
Will bankruptcy follow suit?
In May, SoftBank held debts amounting to $140 billion. According to The Economist, this was “the sixth-largest pile for any listed non-financial firm in the world.” More losses only make SoftBank’s situation worse, but it hasn't pointed to bankruptcy as a way out yet. In the meantime, Son (commonly referred to as Masa) will have to wait and see if his adjustments to the company’s investments work to get it out of the hole.