SoftBank: $39B loss is a monument to Masayoshi Son’s risk management flaws

Once touted for their vast reach, SoftBank’s tech investment funds are now notorious for their massive losses. These stood at 5.3 trillion yen ($39 billion) last year, setting a record just of the wrong kind for Masayoshi Son, founder of the Japanese technology investment group.

The destruction of value stands as a monument to a year in which rising interest rates took a toll on tech stocks. SoftBank is the largest and most well-known bull in the industry. Its shares have halved from its 2021 peak.

The group announced a trailing loss of 970 billion yen ($7.2 billion) in consolidated results for the year through March. The scale of the loss is surprising, given a $29 billion sell-off of Alibaba stock. It is the company’s second year in the red.

SoftBank and its Tagalong Vision Fund unit cannot be blamed for their optimism. They still have high hopes for stakes in companies like ByteDance, the parent company of Arm and TikTok.

ByteDance was valued at $75 billion in 2018 when SoftBank entered a funding round. The valuation peaked at $220 billion, promising a windfall for Son and his shareholders.

It seems less likely now. The US market is crucial for ByteDance. TikTok has more than 150 million monthly active US users, nearly half of the population. Its popularity has sparked concerns that user data could be shared with the Chinese government.

TikTok denies it. But the possibility of a total ban by the US cannot be ruled out. A number of US lawmakers support this. Montana could become the first US state to pass legislation banning TikTok on personal devices.

ByteDance still has Douyin, the Chinese equivalent of TikTok, for the local market. But this lacks the global reach and ad revenue potential of TikTok.

As for UK-based chip designer Arm, SoftBank reportedly hoped for a $60 billion valuation from a New York listing. Valued at an industry multiple, a value of around $34 billion is more likely. Chinese investments in artificial intelligence may not bring much relief to SoftBank given the political difficulties in exporting their technology.

After massive investment losses, SoftBank shares are trading at a staggering 46% discount to net asset value. As a judgment on Son’s risk management skills, it seems fair.