Japanese group says market turmoil and soured bets caused $17bn loss at investment fund

SoftBank has warned of a $12.5bn annual operating loss — its biggest ever — after its $100bn investment fund sustained a heavy hit from the market turmoil sparked by the coronavirus outbreak.
The Japanese group blamed a likely ¥1.8tn ($16.7bn) blow to its Saudi-backed technology fund on a “deteriorating market environment” which had devastated the value of founder Masayoshi Son’s biggest bets on start-ups. 
The declines were amplified by a further ¥800bn writedown on SoftBank’s investments outside the Vision Fund, including at lossmaking office sharing group WeWork and OneWeb, the satellite internet start-up that filed for bankruptcy last month.
Shares in SoftBank closed up 5.2 per cent on Tuesday in Tokyo, having fallen 3.4 per cent on Monday before the full-year warning was released. Analysts said the guidance gave investors clarity on the depth of the coronavirus fallout on Vision Fund investments, with shares also still supported by plans for a ¥2.5tn buyback. 
Still, the poor performance marks a sharp setback for Mr Son, SoftBank’s chief executive, who used the fund’s investment firepower to make large bets on companies including Uber, the ride-hailing group, Oyo, the Indian hotel chain, and dog-walking app Wag. 
However, the lockdowns imposed across the world have had a severe impact on Uber and Oyo, as well as many of the 86 other group’s in the Vision Fund’s portfolio, dozens of which have their fortunes inextricably linked to consumer spending, travel and transportation. 
Kirk Boodry, a tech analyst at Redex Holdings, said a large portion of the fund’s losses were likely to have been in the ride-hailing sector, including Vision’s stakes in China’s Didi Chuxing and Singapore’s Grab, while Oyo would also have been hit hard. 
“A lot of things are still unknown, including whether there is going to be a second round of coronavirus fallback,” said Mr Boodry, who publishes on research platform Smartkarma.
For the fiscal year ended March, SoftBank expects an operating loss of ¥1.35tn compared to a profit of ¥2.3tn a year ago.
SoftBank’s stock price had recovered sharply since plunging to a four-year low of ¥2,687 on March 19. The sell-off prompted emergency meetings, in which Mr Son considered taking the company private before electing to launch plans for a $41bn asset sale to ease the pressure.
Even before the pandemic, SoftBank saw an operating loss of ¥13bn during the first nine months of the fiscal year after the Vision fund suffered an operating loss of ¥797.8bn due mainly to losses at WeWork and Uber. 
The market downturn has refocused investor attention on the group’s liabilities, totalling $55bn in net debt and $180bn in total consolidated borrowings. The volatility also put pressure on Mr Son, who pledged as much as 60 per cent of his shares in the company as collateral against billions of dollars of personal loans in March.