After a traumatic year that saw its assets battered by a US tech stock sell-off and a regulatory crackdown in China, Japanese investment behemoth SoftBank Group reported a record annual net loss on Thursday. SoftBank’s large interests in global tech companies and risky new endeavors have resulted in erratic returns, and the current drop coincides with a drop in tech stocks as the US raises interest rates to combat inflation.
The corporation lost 1.71 trillion yen ($13.2 billion) in the fiscal year ending March 2022, a dramatic drop from its over five trillion-yen net profit the previous year, which was buoyed by massive market rallies. SoftBank said its tech-focused Vision Fund incurred losses “due to a reduction in the share prices of most listed portfolio businesses,” resulting in a 3.4 trillion-yen investment loss. The Nasdaq, a tech-heavy index in the United States, has lost more than 28% of its value in the last six months.
The Japanese conglomerate’s losses were exacerbated by its large stakes in the Chinese ride-hailing company which goes by the name of Didi Chuxing and the e-commerce behemoth popularly known as Alibaba, both of which have been battered by Beijing’s anti-business campaign. The plunging yen, which has recently touched 20-year lows as the gap between US tightening and Japan’s ultra-loose monetary policy deepens, was the cherry on top.
Asymmetric Advisors’ Amir Anvarzadeh said “all hopes” were now on Arm going public, but warned that an extremely high price might be destructive in the long run. “Anything over $30 billion for Arm will certainly leave it overvalued and vulnerable to a sell-off soon after,” says the analyst. The IPO confronts challenges, including the current market downturn, which makes a high valuation for Arm implausible, and SoftBank CEO Masayoshi Son admitted that the IPO may be postponed if conditions deteriorated.