Sam Nussey

TOKYO (Reuters), SoftBank Group Corp reported Tuesday a 97% fall in quarterly profit. The deal to sell Chip Designer Arm, worth more than $60 billion was canceled. There is mounting pressure for the Japanese conglomerate support its sagging shares.

SoftBank announced that it made a net profit in October and December of 29 billion Japanese yen (251 million), compared to a record profit of 1.2 trillion yen a year ago as the portfolio grew.

SoftBank, however, announced that it had failed to sell Arm To Nvidia (NASDAQ 🙂 because of regulatory issues. This was a setback for its plan to raise funds.

Japanese investment company Nvidia announced that they would recognize the $1.25B breakup fee it received from Nvidia as a result of a quarter-end profit.

SoftBank CEO Masayoshi son rode the recovery of valuations after tech unicorns fell into “valleys of the coronavirus”, in the early stages of the COVID-19 pandemic.

Valuations are now under threat as investors look skeptically at tech companies promising future profits, and central banks work towards reducing pandemic stimuli.

A unit of the Vision Fund posted an investment gain totalling 111.5 billion Yuan during the quarter. This is sharply lower than the gain of 1.4 Trillion yen a year ago.

“Even though certain public companies have fallen in value, there have also been substantial follow-on financing rounds where institutional investors have led these rounds,” Vision Fund Chief Financial Officer Navneet Governoril stated to Reuters.

SoftBank portfolio company companies trading below the listing price of many are falling, such as ridehailer Grab (office-sharing platform), and Auto1 (used-car platform) all dropping during this quarter.

As regulators pursue tech companies, the exposure of this group to China also has impacted its performance. The shares of the e-commerce giant Alibaba SoftBank had a 55% stake in the NYSE:, which dropped to a mere 1% in December.

These assets can be used to make loans by the group through the Vision Fund unit. This Vision Fund runs both the $100 billion Vision Fund as well as a smaller second fund. It has now become the top priority of the group.

Vision Fund 2 had $43.1 billion invested in over 200 startups by the end December. It had $51 billion of committed capital as of December 31st. The disconnect between private capital and the openness of public markets has been noted by industry experts.

Govil explained that “we are experiencing some healthy rebalancing…at some of the most extreme ends of market.” “We turned down quite some transactions as valuations seemed too high.”

Portfolio companies held round funding, which included Fanatics (sports ecommerce firm), during this quarter. Vision Fund, which includes both the funds and its restricted partners, has given $44.2 million to its limited partners.

These earnings are coming at an important moment in the history of the conglomerate. Marcelo Claure (COO), who was responsible for restructuring WeWork and launching the Latin American-focused fund, is leaving the company.

SoftBank in November launched a buyback of 1 trillion yen. The earnings beat the shares by 0.9% and group shares fell about half a percent from their March highs.

Son, three months earlier saying that SoftBank was caught in a “blizzard”, is scheduled to speak at a conference at 4:30 pm local time (0730 GMT).

($1=115.4500 yen)