The second quarter was not kind to SoftBank Group Corp. or its portfolio companies.

The Japanese technology conglomerate today posted financial results for the three months ended Sept. 30, revealing a 704 billion yen, or $6.5 billion, loss caused by the Vision Fund. Launched in 2017, the Vision Fund is a $100 billion investment vehicle through which SoftBank makes big-ticket bets on startups that it believes have strong growth potential. Not all of those bets have panned out. 

The Vision Fund’s losses took the form of billions of dollars in writeoffs that it had to make on its investments, with the main culprit being WeWork parent We Co. SoftBank marked down the value of its WeWork stake by $4.6 billion after the co-working company scrapped a planned initial stock market offering because of lackluster demand. Following the IPO withdrawal, SoftBank took control of the company in a $9.5 billion deal that saw it buy out the equity of ousted founder Adam Neumann. 

“My investment judgment was poor in many ways and I am reflecting deeply on that,” SoftBank Chief Executive Officer Masayoshi Son said during a news conference after the earnings report.

The value of the company’s stake in Uber Technologies Inc. also dropped during the second quarter as the ride-hailing giant’s stock continued its slide. Uber is currently trading at around $27, well below its $42 IPO price.

The second-quarter results represent the first time SoftBank has posted a loss in 14 years. The company found itself in the red even though its Japan-based telecommunications business, SoftBank Corp., beat analyst estimates by reporting a 9% increase in profit. 

Another important piece of context is that though the value of the Vision Fund’s startup stakes dropped in the second quarter, they’re collectively worth more than what SoftBank had originally paid for them. The company invested $70.7 billion in 88 companies as of the end of September and those investments are now worth $77.6 billion. In the news conference, Son said that his plans to raise a second $108 billion Vision Fund are still on track.

SoftBank’s moves are closely watched in Silicon Valley because its massive checkbook has positioned it as the world’s single largest technology investor. As of October, funding rounds led or partially backed by the company accounted for an estimated one-10th of all venture capital deployed globally in 2019. Since the Vision Fund came online in 2017, the average size of funding rounds has risen noticeably and startups are now waiting longer before going public. 

Photo: SoftBank