Softbank has reported a record quarterly loss of 3.1tn yen (£19bn)after the global sell-off of tech stocks, prompting the embattled Japanese conglomerate to embark on a big cost-cutting drive.
Masayoshi Son, the chief executive of Softbank, said the company was to launch a “dramatic” group-wide cost-cutting drive after a 7tn yen gain in investments made by its Vision Funds were almost completely wiped out over the past six months.
Softbank, which is seeking to float the Cambridge-based chip maker Arm, was also hit by an 820bn yen foreign exchange loss in the second quarter as the currency plunged to a 24-year low against the US dollar last month.
The company’s $100bn (£83bn) Vision Funds, launched in 2017 and 2019, have made investments in tech stars including the artificial intelligence company SenseTime, the US delivery service DoorDash and the South Korean e-commerce firm Coupang which have resulted in their valuations crashing amid the wider global slump in tech stocks.
“The market and the world is in confusion,” Son said. “If we had been a little more selective and invested properly, it would not have hurt as much. I want to reflect on this and remember this as a warning.”
Son said that he had got carried away with the tech boom last year, but now feels “embarrassed” by that reaction. “I am ashamed of myself for being so elated by big profits in the past,” said Son, who added that the headcount at its Vision Funds may need to be “reduced dramatically”.
He added that cost cutting would also be extended across SoftBank as a group.
Son has already radically scaled back investment activity. The Vision Fund arm approved just $600m in new investments in the first quarter, compared with $20.6bn in the same period a year earlier.
“We need to cut costs with no sacred areas,” Son said.
Son has already suffered a series of high-profile reversals after big bets by the first Vision Fund in late-stage startups such as the office sharing company WeWork soured, prompting him to tighten investment controls with the second fund.
However the billionaire said Vision Fund 2, which has taken smaller stakes in a larger number of companies, had invested at frothy prices. “We were in a kind of bubble on valuations,” he said.