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SoftBank turns to profit after record loss when Vision Fund recovers

Masayoshi Son, Chairman and CEO of SoftBank Group at the SoftBank World 2018 event in Tokyo, Japan.

Kiyoshi Ota | Bloomberg | Getty Images

SoftBank Group posted a quarterly $ 12 billion profit on Tuesday after reporting historical losses of $ 13 billion for its last fiscal year.

The recovery is largely due to rising valuations of SoftBank Vision Fund investments such as Uber and Slack, which saw their stock prices rally during the April-June quarter as US technical stocks rose sharply during the coronavirus pandemic.

SoftBank Vision Fund, which reported a loss of $ 1

8 billion last year, recorded an investment gain of $ 2.8 billion for this quarter.

Vision Fund’s earnings have been further strengthened by new IPOs in the US domestic insurance startup Lemonade, which SoftBank supported with $ 300 million, valued at over $ 1 billion, for example.

SoftBank also increased its share price with a share repurchase plan. In March, the company said it planned to sell $ 41 billion in assets to buy back shares in the company and reduce debt.

It reduced its stake in Alibaba and its Japanese telecoms unit. It is now considering selling British chip designer ARM, for which it paid $ 32 billion, to US chip giant Nvidia, according to people familiar with the matter.

SoftBank CEO Masayoshi Son confirmed that the company is exploring options for chip design ARM on Tuesday, adding that he is considering selling part or all of ARM, or taking ARM publicly.

Uncertainties in the Vision Fund

The first Vision Fund, launched by Son in 2017, shocked the tech investment community because of its large size. At $ 100 billion, it was several orders of magnitude larger than any other technical investment fund, including those from Silicon Valley heavyweights such as Sequoia and Andreessen Horowitz. More than half of the money comes from donors such as Apple, Qualcomm, Oracle founder Larry Ellison and the Public Investment Fund of the Kingdom of Saudi Arabia. In less than three years, the Vision Fund has supported some 90 start-ups with more than $ 75 billion.

In July 2019, SoftBank shocked tech investors again when it announced plans to create a $ 108 billion “Vision Fund 2” to invest in artificial intelligence (AI). The SoftBank group pledged $ 38 billion to Vision Fund 2, while Apple, Microsoft and Foxconn were all named as external contributors to the extra billion.

Vision Fund 2 is up and running with only $ 38 billion from SoftBank Group. External investors decided to put their contributions in stock while waiting for the early Vision Fund investments to turn out.

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