Japanese tech investor Softbank Group has announced drastic savings after the company posted a record 3.16 trillion yen ($24 billion) loss in the first part of the fiscal year.

Softbank founder Masayoshi Son justified the loss with the fall in value of technology stocks in the spring and the weak yen.

Patrick Welter

Correspondent for business and politics in Japan based in Tokyo.

  • Follow I follow

Son, who usually exudes an unwavering optimism, described the press conference after the record loss as depressed.

He was ashamed that he had been so elated after previous big wins, he said a few days before his 65th birthday.

But even on the day of Softbank's biggest loss, Son remained true to the colourful, eccentric and often over-the-top style of his presentations.

The Softbank chief drew a parallel with the Battle of Mitakagahara in 1573, in which the future shogun Ieyasu Tokugawa suffered a major defeat because he listened to his ego rather than the advice of his allies.

Son said he felt the same way as Tokugawa did after the defeat. He wanted to take the episode as a warning.

Tech bear market melts valuations

The heart of Softbank Group, Vision Mutual Funds, posted a loss of 2.94 trillion yen for the April-June period, almost the same as in the previous quarter.

Much of this is unrealized valuation losses that can be recovered.

But within a year, Softbank has pushed the funds' cumulative investment gains, which had reached 7 trillion yen, to almost zero.

"If we had invested a little more selectively and properly, the damage wouldn't have been so great," Son said.

The most important reason for the minus are the prices for technology stocks, which have been falling since the spring.

Companies that Softbank's vision funds supported in their IPO did particularly poorly.

A share index for fund companies calculated by Softbank lost 31 percent in the second quarter, while the American Nasdaq index slipped only 22 percent.

Of Softbank's holdings, South Korean online department store Coupang, Hong Kong-listed artificial intelligence provider Sense Time, and American food delivery service DoorDash were particularly hard hit.

The weak yen left Softbank with a net loss of 819.9 billion yen as dollar-denominated debt had to be revalued.

Investments in almost 500 companies

Son has shaken up the private equity market in recent years after raising $100 billion in investment capital, much of it from Saudi Arabia, for the first Vision Fund in 2017.

Its investment strategy is to invest in young companies in the fields of internet and artificial intelligence in order to benefit from a successful IPO.

He wants to secure a future for his four-decade-old company Softbank for 300 years or more.

Son's skill as an investor is based primarily on the fact that 22 years ago he invested $20 million in Jack Ma's Chinese Internet start-up Alibaba, which developed into the country's largest Internet department store and brought Son a profit of more than $50 billion.

Softbank has currently inverted in more than 470 companies.

Son expects only two or three of those to outperform Alibaba.

But that would then carry the return for all investments.

On Monday, Son was very thoughtful about this investment strategy.

“If we pursue our vision unilaterally, we risk annihilation.

This must be avoided at all costs.”

Failures such as the billions in investments in the Internet driving service Uber or the office space rental company WeWork had made Softbank more cautious in recent years.

In May, Son had announced a period of investment restraint, also with reference to the more difficult overall economic environment.

It is unclear whether this period will last three months or three years, he said on Monday.

"For unlisted companies, winter can last longer than for publicly traded companies."

As a hedge in the tough times, Softbank has already mobilized billions of dollars and bolstered its cash reserves by selling about a third of its Alibaba shares forward with a buyback option.

Son did not disclose on Monday whether he saw further scope for this.

He was also silent on the details of the planned IPO of the British chip designer Arm.

As is often the case when asked about his age, Son said he was getting more and more enthusiastic about his job.

His vision is rock solid.

He did not quote Tokugawa on the occasion.

After losing the battle of Mitakagahara, it took Togukawa another 27 years to unify Japan under his leadership and establish the shogunate that ruled Japan for almost 300 years.