No Soft Touch

Image source: SoftBank

What's going on?

Japanese conglomerate SoftBank announced on Tuesday that it lost money last quarter.

What does this mean?

When the going gets tough, the tough get going – so it’s a real shame the Japanese giant isn’t named “ToughBank”. Instead, the conglomerate showed it was aptly named last quarter, adopting a softly-softly approach and a more “defensive” position. Thing is, that didn’t actually help: SoftBank’s Vision Fund business – which oversees the world’s biggest tech-focused investment funds – saw the value of its holdings in unlisted companies take a nosedive. And the firm’s listed investments didn’t fare much better, with losses in companies like Coupang and WeWork overshadowing some small recoveries. The end result was that the Vision Funds lost $5.5 billion. That’s about half what they lost the quarter before, sure, but it’s the fourth straight time they’ve finished in the red – meaning SoftBank startled analysts by posting an overall loss too.

Why should I care?

For markets: Loser’s quandary.
These back-to-back losses have tied SoftBank’s hands and hampered its ability to make the big, bold bets it’s best known for. And that has the firm facing a tricky Catch-22, because a successful moonshot could be just what SoftBank needs to lift it out of the hole it’s stuck in. Last quarter, though, the firm split under $350 million in investments between a handful of startups – chump change compared to the $144 billion plus it invested over the previous five and a half years.

The bigger picture: Armed and dangerous.
SoftBank’s having a tough time right now, and the firm’s counting on a big upcoming move to turn things around. The firm’s planning to list chip design giant Arm on the stock market – but while the venture could be a whopper, success is far from guaranteed. After all, the plan is to list by December, but weak markets could cause all kinds of delays, keeping poor old SoftBank cash-strapped.

Originally posted as part of the Finimize daily email.

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