Japan’s Softbank logs quarterly loss as Arm IPO offers little support

Investing.com-- SoftBank Group Corp. (TYO:9984) posted a surprise quarterly loss on Thursday, as the value of the technology conglomerate’s major investments continued to trend lower amid weak market sentiment. 

Softbank (OTC:SFTBY) clocked a net loss of 789 billion yen in the three months to September 30, compared to a profit of 3.034 trillion yen a year ago, the Japanese tech giant said in a release. The year-ago figure was boosted greatly by gains on the sale of its holdings in Alibaba Group (NYSE:BABA). 

Diluted losses per share were 639.90 yen, compared to an Investing.com forecast for a profit of 40.1 yen. 

Softbank’s revenue rose slightly to 1.669 trillion yen, compared to 1.610 trillion yen from a year ago. The reading beat estimates that revenue would remain largely unchanged. 

Despite the higher revenue, the tech conglomerate’s flagship Vision Fund logged a loss of 570.2 billion yen for the quarter, compared to a loss of 1.434 trillion yen a year ago. 

The total carrying value of investments under Softbank’s Vision Fund fell to 11.082 trillion yen from 11.478 trillion yen in the prior quarter. The firm also logged a heavy loss on its derivatives investments. 

A highlight of the quarter was Softbank’s public listing of its chip design division Arm Holdings (NASDAQ:ARM) on the Nasdaq, which generated about $5.1 billion in proceeds for the conglomerate. 

But Arm swung to a loss in the September quarter, and also forecast revenue and earnings that were lower than market expectations, when it reported quarterly earnings this Wednesday. 

Softbank also did not record a gain on the Arm IPO, given that it has still retained the firm as its subsidiary. 

The results somewhat dulled expectations that the company will benefit greatly from a boom in artificial intelligence this year. 

But Softbank founder Masayoshi Son has repeatedly expressed optimism over the AI boom, stating that Softbank will aggressively pursue growth in the sector. 

Softbank was also dealt a blow this week after real estate start-up WeWork Inc (NYSE:WE) applied for Chapter-11 bankruptcy. Softbank was a key investor in the firm, which was at one time America’s most valuable start-up with a peak value of $47 billion. But bankruptcy highlights a stellar fall from grace marked by a botched IPO, the ouster of founder Adam Neumann and a ceaseless struggle for profitability. 

Softbank said its Vision Fund logged a total loss of 234.4 billion yen over the past six months due to investments in WeWork. 

Under the bankruptcy proceedings, Softbank will still retain an equity stake in the firm, but has consistently written down the value of its holdings in WeWork.