Son Jeong-ui in Crisis, Management Skills Put to the Test... SoftBank's Challenges to Overcome

Masayoshi Son, CEO of SoftBank

[Asia Economy Reporter Jeong Hyunjin] "By nature, I like aggressive play. But (amid the great turmoil of COVID-19 and the Ukraine war) when it rains, I open an umbrella."

On the 12th, when SoftBank Group recorded a record net loss of 1.708 trillion yen (about 170 trillion won) in the fiscal year 2021 (April 2021 to March 2022), Son Jeong-ui, chairman of SoftBank Group, began his presentation at a press conference held in Tokyo, Japan, with a slide titled ‘Concerns about SoftBank?’ Throughout the 90-minute event, he emphasized that he knows how to overcome difficult times and focused on reassuring investors.

Son actively expressed his position because recently there have been criticisms that his management skills are being put to the test in the market. The British magazine The Economist, on the 16th (local time), highlighted Son’s current situation in an article titled "SoftBank is bracing for greater pain after a bruising year." SoftBank’s performance over the past four years has been a rollercoaster, with a profit of 1.41 trillion yen in 2018, a loss of 960 billion yen in 2019, and a record net profit close to 5 trillion yen in 2020.

The reason SoftBank’s performance fluctuates greatly is because the Vision Fund, the world’s largest technology fund that Son considers a core driver, is faltering. The Vision Fund posted an investment loss of 3.7388 trillion yen in fiscal year 2021, a sharp reversal from an evaluation gain of 6.292 trillion yen just one year earlier. The technology stocks that the Vision Fund mainly invests in plummeted, and one of its key portfolio companies, China’s Alibaba, was hit by government pressure, leading to deteriorating performance. Additionally, interest rate hikes centered in the U.S. and worsening financial soundness also had an impact. Son said, "This year, I will invest defensively," taking a step back.

Son’s management skills are expected to be evaluated based on how he resolves the imminent challenges. First, it is not easy for SoftBank to liquidate assets. As the global market worsens, it has become difficult for the companies they have invested in to proceed with initial public offerings (IPOs). Indian hotel startup Oyo planned to go public in October this year to raise $1.1 billion but recently hinted at reducing the fundraising target or postponing the IPO timing. The Economist also reported that IPO schedules for Vision Fund portfolio companies such as ByteDance, the parent company of China’s TikTok, are being delayed. British semiconductor company ARM, whose merger with U.S. Nvidia fell through, is preparing for an IPO targeting mid-next year, but the market cautiously suggests a possible delay.

Another issue he must address is SoftBank’s financial stabilization. SoftBank has borrowed massive funds from major Japanese banks using the value of its assets as collateral and poured them into investments. In this situation, if the value of the assets held plummets, the collateral will naturally be shaken, raising concerns about financial soundness. Son stated that they are managing the net debt ratio relative to equity at within 25%. The Economist said, "In the short term, it is a manageable situation, and the cash SoftBank holds is sufficient to cover debt repayments."

This content was produced with the assistance of AI translation services.