Japanese conglomerate holding company SoftBank is positioned to take a big hit from its investments in bankrupt cryptocurrency exchange FTX. The FTX losses are just the latest in a long string of disastrous investments for SoftBank in recent years that have resulted in billions of dollars of losses.
What Happened? Bloomberg recently reported SoftBank invested roughly $100 million in FTX but reportedly kept the investment market close to cost. The company will likely write down its FTX holdings in the December quarter.
SoftBank is certainly no stranger to bad investments in recent years. In May, the Toyko-based investment firm said it lost $26.2 billion in the first three months of 2022 amid a broad sell-off in technology stocks.
SoftBank CEO Masayoshi Son has been one of the largest victims of a sell-off in high-growth initial public offerings, a massive correction in Chinese stocks and a widespread rotation out of the technology sector.
SoftBank’s Vision Fund was valued at $138.5 billion at the end of 2021. The Wall Street Journal reports the tech-heavy fund has generated roughly a 40% return over the last 4 1/2 years, significantly lagging both the S&P 500 and the Nasdaq during that time.
SoftBank’s Sour Investments: Son is known for his risk-taking, including taking a 25% stake in Chinese e-commerce and cloud computing giant Alibaba Group Holding Ltd – ADR BABA. Alibaba went public in 2014 at an IPO price of $68, and the stock peaked at around $319 in 2020.
Yet China’s aggressive COVID-19 lockdown policies coupled with crackdowns on Chinese stocks by both Chinese and U.S. regulators have sent Alibaba shares tumbling all the way back down to around $72.
In 2018, SoftBank invested $240 million in San Francisco-based e-commerce company Brandless at a $500 million valuation. Roughly two years later, the company shut down completely.
The Vision Fund also invested more than $12 billion in Chinese ridesharing company DiDi Global Inc – ADR DIDIY. Didi went public on the NYSE in June 2021 at an IPO price of $14 per share. Chinese regulators almost immediately cracked down on the company following its public listing, forcing DiDi to delist from the NYSE in June 2022. Today, the stock trades on the OTC market at just $2.44 per share.
In recent years, SoftBank also has several other high-profile investments that went south in a big way, including a failed IPO by WeWork, insolvency by Greensill Capital and a bankruptcy by Katerra.
Even SoftBank’s pandemic successes, including stakes in DoorDash Inc DASH and Coupang Inc CPNG have tanked in value in the last year.
On Friday, the Vision Fund said it plans to cut its staff by more than 30% in response to its recent struggles.
Benzinga’s Take: Son takes an aggressive, non-diversified approach to investing with SoftBank’s Vision Fund, focusing on high-growth tech stocks and companies with charismatic leadership while failing to manage risk appropriately. In the U.S., Cathie Wood has taken a similar approach with her tech-focused ARK Innovation ETF ARKK, which is now down 15% overall in the last three years compared to a 28.8% gain for the S&P 500 in that time.
SoftBank CEO Masayoshi Son. Photo via Shutterstock.