The Economist May 21st 2022 59
Business
SoftBank
Hard landing
A
year ago, at the height of the pandem
ic boom in all things digital, Son Masa
yoshi embodied the futuristic promise of
global techdom. The flamboyant founder
of SoftBank Group, a telecomsandsoft
ware firm turned investment powerhouse,
reported the highest ever annual profit for
a Japanese company, driven by soaring val
uations of the public and private techno
logy darlings in its vast portfolio.
Twelve months later SoftBank and
Masa, as Mr Son is known for short, are
once again the face of tech. Now both he
and the industry are dealing with rising in
terest rates, deteriorating balancesheets,
investor disillusionment and, for good
measure, China’s crackdown on its digital
champions and reinvigorated trustbusters
in the West. What happens next to the
Masaverse is thus of interest not just to
SoftBank’s ailing shareholders, who have
collectively lost $140bn or so in stockmark
et value since its share price peaked in Feb
ruary 2021, but also to anyone interested in
the fate of tech more broadly.
On May 12th SoftBank reported a net
loss of ¥1.7trn ($15bn) for the latest finan
cial year ending in March, caused primari
ly by a ¥3.7trn writedown in the net value
of its flagship tech investments (see chart 1
on next page). Its public holdings, most
notably in Alibaba, a Chinese ecommerce
giant pummelled by the Communist Par
ty’s crackdown on China’s big tech, are los
ing their shine. Northstar, an illfated trad
ing unit which funnelled surplus funds
from the parent company mainly into
American tech stocks, has been all but
wound down after losing ¥670bn last year.
SoftBank’s vast private investments, in
lossmaking startups with unproven busi
ness models, are being rapidly repriced as
higher interest rates make firms whose
profits lie mostly far in the future look less
attractive to investors. Competition au
thorities have halted the $66bn sale of
Arm, a British chipmaker, to Nvidia, a big
ger American one. All this is making Soft
Bank’s net debt of $140bn, the sixthlargest
pile for any listed nonfinancial firm in the
world, harder to manage. And there may be
more pain to come, for the tech selloff has
accelerated since March, when SoftBank
closed the books on its financial year.
SoftBank’s first big challenge has to do
with its assets—and in particular its ability
to monetise them. The pipeline of initial
public offerings (ipos) from its $100bn
Vision Fund and its smaller sister, Vision
Fund 2, is drying up. That makes it harder
for Mr Son to realise gains on early invest
ments in a string of sexy startups. Oyo, an
Indian hotel firm backed by SoftBank, un
veiled plans in October to raise $1.1bn from
a listing, but more recent reports suggest
that the company could cut the fundrais
ing target or shelve the plan altogether.
Other holdings, including ByteDance (Tik
Tok’s Chinese parent company), Rappi (a
Colombian delivery giant) and Klarna (a
Swedish buynowpaylater firm) were all
rumoured to be plausible ipo candidates
for 2022. None has announced that it in
The Japanese investment giant’s travails are global tech in a nutshell
→Alsointhissection
60 DoesMuskstillwantTwitter?
61 Adanicementshislegacy
61 ThegreatunSPACing
62 Supermarketcrash
63 Bartleby:Betterbrainstorming
64 Schumpeter: Green power v Biden