You wouldn’t think a company losing billions would be giving itself a little pat on the back, but here we are.
Driving the news: SoftBank reported a US$7.2 billion loss in the past year, a step up from a US$12.6 billion loss the year before… but still a lot of money, if you ask us. The company’s 2021 losses came after a spending spree described as “delirious” by CEO Masayoshi Son, during which he poured billions into tech startups while riding high on soaring valuations.
- This is all after Softbank’s Saudi-backed Vision Fund lost about $18 billion in 2020 after some of its biggest investments turned sour (read: WeWork, Uber).
If you’re wondering how SoftBank can afford to exercise the same level of control as your buddy who doesn’t know when to call it quits at the blackjack table, it’s thanks to a massive stake in Alibaba. By selling off shares, the company has been able to ride out the losses in its two Vision Funds and more recently, invest resources into everyone's new obsession: AI.
- SoftBank is also preparing for a US initial public offering of Arm, a semiconductor design firm, with Son focusing on revenue growth following a loss in the last quarter.
Bottom line: Softbank has exposure in all the wrong places (mostly high-growth tech companies) amidst an environment of still-high inflation, high-interest rates, and increasing geopolitical tensions involving China. But as the company sells off its once-$200 billion stake in Alibaba, its buffer for bad investment decisions is dwindling.—SB