SoftBank blames COVID-19 for $16.7B write-down

The coronavirus outbreak has made a bad situation much worse for SoftBank's shareholders.

Through exposure to the Vision Fund, which invests (heavily) in tech companies, they have already seen the balance sheet get a pummeling through various missteps, not least the WeWork debacle last November. (See Big overseas bets skewer Japanese telcos.)

At the end of the third fiscal quarter (December 31, 2019), SoftBank shareholders were reeling because "fair value" of Vision Fund investments attributable to the SoftBank balance sheet had fallen by a hefty $6.2 billion over the previous nine months.

Now things have got even worse. SoftBank's earnings guidance for fiscal 2019 (ended March 31, 2020) anticipates Vision Fund operating losses to reach a staggering 1.8 trillion Japanese yen ($16.7 billion).

In a brief statement, SoftBank blamed a "deteriorating market environment" – read COVID-19 – for the balance-sheet carnage.

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Dire Vision Fund performance inevitably puts Masayoshi Son, SoftBank's risk-taking CEO, in the spotlight.

Set up by Son in early 2017, with help from Saudi Arabia, the Vision Fund had a war chest of $100 billion. Of that sum, $75 billion has been spent on getting stakes in dozens of big tech startups.

COVID-19 or no COVID-19, many are questioning Son's once sure-footed investment performance – the Alibaba stake was his finest moment, although critics say he got lucky there – including himself it seems. "My judgement around WeWork was not right in many ways," he said recently. (See SoftBank's Son is losing his shine.)

There's also some evidence that Son is reining in his risk-taking instincts, paying much more attention to debt reduction than he used to.

Last month, SoftBank announced a 12-month plan sell up to $41 billion of assets across its global empire, using the resulting funds to slash debt and boost cash reserves amid investor unease about the impact of the COVID-19 pandemic on its business. (See SoftBank preps $41B asset sale amid COVID-19 panic.)

— Ken Wieland, contributing editor, special to Light Reading