SoftBank to rethink Vision Fund II post a dismal Q3

SoftBank’s technology-focused $100 billion Vision Fund dragged the group’s total operating profits in the October to December quarter by 99%, deepening skepticism over the possibility of achieving the ambitious $108 billion target for its sequel fund.

The Tokyo-based group’s profits slid to 2.6 billion yen ($24 million) versus 438 billion yen a year earlier. The Vision Fund recorded an operating loss of 225 billion yen ($2.05 billion) against 176 billion yen profit, year over year.

Its expensive bets on loss-making consumer-technology centric businesses like WeWork, Uber, Lyft and OYO, Ola, and Lenskart closer home amongst many others hit the quarter’s results.

Read: Baby products etailer FirstCry is the latest unicorn in SoftBank Vision Fund portfolio

In October, WeWork received a $9.5 billion worth lifejacket from its largest investor in exchange for an 80% stake of the company.

The Vision Fund II hasn’t managed to hit its target corpus. For now, SoftBank will continue to invest with its own capital. Public Investment Fund of Saudi Arabia, the sovereign wealth fund of Saudi Arabia was the largest investor of the first Vision Fund.  According to several media reports, the  Gulf sovereign wealth fund money is undecided on backing the  follow-on fund.

The company, through its vision fund 1, had invested $80 billion across 88 investments and returned $10 billion (including 7% preferred equity coupon payments) to its sponsors, a top-run executive at the company had reportedly said in December.

“After a tough winter, spring has come. That’s something actually (sic) what we told ourselves, that's how I feel this morning,” Masayoshi Son, CEO and founder of the conglomerate said at the investors’ presentation of the financial results announcement.

One of the world’s most powerful activist investors, New York-based Elliott Management, has built up a stake of about $2.5 billion in SoftBank and is pushing the giant to make changes that would boost its share price, according to a report in the Wall Street Journal last week.

SVF I in India

Vision Fund’s largest investment in the subcontinent is Flipkart, which it had made for a whopping $2.5 billion back in 2017, a business it successfully exited post the Walmart buy.

Its second-largest investment till date is Ritesh Agarwal-owned OYO’s parent operator Oravel Stays, which has been on complete streamlining mode since the disclosure of its public listing plans in the near future, after an aggressive expansion run in 2020.

Read: OYO board approves $1.5 bn infusion from SoftBank, RA Hospitality

SoftBank owns nearly half the Airbnb-backed hospitality chain.

SVF’s other large investments in the Indian technology startup space include Ola Electric Mobility, BrainBees Solutions the parent operator of baby products e-tailer FirstCry, Paytm, and Delhivery, third-party logistics service provider.

Read: T Rowe Price joins SoftBank, Ant Financial in Paytm funding round