SoftBank Posts $5.2B Loss on Impact of WeWork Bankruptcy

Japanese tech investor SoftBank Group Corp. reported another quarterly loss on Thursday, weighed by a reduction in the value of its tech investments and the collapse of US coworking space provider WeWork Inc.

The Tokyo-based conglomerate booked a net loss of ¥789 billion ($5.2 billion) in the fiscal second quarter, compared with a profit of ¥3.01 trillion in 2022 when it cut its stake in Chinese online retail giant Alibaba Group Holding Ltd. to 14.6% from 23.7%.

SoftBank cited a weaker yen increasing costs on its dollar-denominated debt as the reason for the loss.

On the other hand, the company saw a ¥21.4 billion investment profit from its Vision Fund in the three months ending September 30 after the unit brought in a ¥160 billion profit in the first quarter.

SoftBank said the gain was due to the share sale of British chip designer Arm Holdings plc to its subsidiary. The move curbed sliding valuations in the group’s portfolio firms, including Chinese artificial intelligence firm SenseTime.

While SoftBank had a successful US initial public offering (IPO) of Arm, the proceeds from the sale were not considered earnings as the UK semiconductor designer is a subsidiary.

In June, SoftBank chief executive Masayoshi Son announced a change to ‘offense’ mode, sharing his enthusiasm for the potential of artificial intelligence (AI) technology. Son stated last year that the company would be in ‘defense’ mode, making fewer investments and taking a cautious approach.

SoftBank Taking a Significant Hit from WeWork’s Collapse

SoftBank took a significant hit after WeWork, one of its largest investments, filed for Chapter 11 bankruptcy protection on Monday after expectations of companies using more of its office-sharing space dwindled.

In the first half, the tech investor incurred a loss of ¥21.6 billion after exchanging unsecured notes of WeWork for shares and convertible bonds.

SoftBank has cut a substantial investment amount in the once-thriving desk-renting startup over the years. Still, the company on Thursday announced that it would provide credit support for WeWork, raising its liabilities by ¥57.5 billion in the first quarter.

WeWork’s fall seems to be costing SoftBank more than the approximated $11.5 billion equity loss and the additional $2.2 billion debt that is still at risk.

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