SoftBank swings to profit on sale of Alibaba stake after worst-ever quarter; Vision Fund reports 1.38 trillion yen loss

Source: AFP

SoftBank Group Corp swung to profit for the first time in three quarters as the Japanese investment conglomerate sold a significant stake in its crown jewel--Alibaba Group Holding to garner money at a time when a majority of its investments have tanked amid a global tech rout.

SoftBank Group reported a net profit of 3.08 trillion yen ($21.77 billion) in the three months to September 30, thanks to a $37.93 billion yen gain related to the early settlement of prepaid forward contracts using Alibaba’s shares, the company’s regulatory filings showed.

SoftBank’s board had approved the early physical settlement of prepaid forward contracts of about 242 million American Depository Receipts, according to a Bloomberg report. After the settlement, which was to happen in August and September, SoftBank’s stake in Alibaba was to go down to 14.6 percent from 23.7 percent as of June-end.

With physical settlement of contracts, compnies give away their right to buy back the stock in the future.

SoftBank’s Vision Fund investment unit, through which the Japanese conglomerate invests in companies, however continued bleeding money as it reported a loss of as much as 1.38 trillion yen on its investments hitting the company's profits for the quarter ended September.

The Masayoshi Son-led investment firm had reported a net loss of 397 billion yen in the year-ago period, with the Vision Fund unit clocking a loss of about 1.17 trillion yen on investments. However, the company reported a small profit of $251 million in October-December 2021.

But for the next two consecutive quarters, the Japanese investment conglomerate’s Vision Fund investment unit lost about $50 billion as investors dumped shares of high-growth technology companies, a kind that the Japanese investment conglomerate favours the most, amid rising interest rates across the globe. SoftBank also announced cutting jobs at its Vision Fund units across the globe and in September, the company reportedly cut 150 jobs.

However, in the July-September quarter, two of SoftBank’s biggest publicly listed portfolio companies--Norway’s robotics firm AutoStore Holdings, South Korea’s e-commerce firm Coupang Inc that had dampened the Japanese investment conglomerate’s earnings in the previous quarter, gained 46 percent and 30 percent respectively, helping SoftBank turn profitable.

Hong Kong’s artificial intelligence firm SenseTime Group Inc, however, continued bleeding money as it was down another 37 percent in the July-September quarter, after already having fallen 47 percent in April-June.

(This is a developing story. Please check back for more details)