Vision Fund Excels Once Again
SoftBank said its Vision Fund posted a record ¥4.03 trillion profit ($36.99 billion), mostly driven by huge business profits booked from its Coupang investment. For the prior quarter, from January to March, net income came in at ¥1.93 trillion ($17.7 billion).
Total SoftBank net profit came in at ¥4.99 trillion ($45.88 billion) for the full year to end-March to become the most profitable investment business in the world, as far as the prior quarter is concerned. Warren Buffet’s Berkshire Hathaway posted profits of $42.5 billion for the previous year.
Vision Fund 1 (VF1) made gains of ¥423.7 billion ($3.90 billion), driven by business sales of its investments in startup companies Guardant Health, OSIsoft, Uber, and others. Moreover, the listing of its startup investments — Coupang and DoorDash — yielded an additional ¥4.28 trillion ($39.37 billion) in unrealized gains for the company.
In March, Coupang went public to raise $4.6 billion at a business valuation of $60 billion. The Coupang investment marks the biggest returns for the startup investing company since Alibaba’s listing in 2014. Moreover, SoftBank yielded $1.8 billion from the IPO of Auto1 Group SE, a German retail car business that went public in February.
Vision Fund 2 (VF2), the smaller VC, recorded unrealized gains on a net business valuation of ¥490.3 billion ($4.51 billion), mainly on the back of the strong stock performance of listed portfolio companies. As a result, the company increased the VF2 capital committed to $30 billion, up from the previous $20 billion.
Overall, the company exited 11 startup investments in the past fiscal year to earn $4 billion in realized business profits.
These results represent a “clear validation” of the vision presented by SoftBank’s CEO and founder CEO Masayoshi Son, said Navneet Govil, Vision Fund's CFO, to Reuters.
Son’s business model is based on aggressive and huge bets on tech startup companies. His investing business mostly makes profits when the startup goes public or is sold to private investors. Earlier, Son indicated he is looking to have between 10 and 20 public listings a year.
“Son needs to convince investors that markets will hold up and they will be able to continue this pace of listing their companies. Investors want to know if these Vision Fund returns can continue and whether they can get more share repurchases,” Kirk Boodry, an analyst at Redex Research in Tokyo, said.
SoftBank stock price fell over 3% in Tokyo as investors are concerned that the company won’t be able to keep up the expected pace of listings.
“The problem facing SoftBank is that the good news is already out. What is less visible are the potential losses on blue-chip public stock investments and derivatives. The negatives are pretty opaque and that’s where investors will be looking at during earnings,” Jefferies analyst Atul Goyal said.
SoftBank reported extremely strong Q4 and full-year results that yielded record profits. The company’s Vision Funds saw a huge surge in business valuations of their startup investments.
About the Author
Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.