• AFP-Jiji

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Investment giant SoftBank Group said on Tuesday net profit plunged 39% in the first quarter, following big gains in the same period last year related to the U.S. merger of T-Mobile and Sprint.

The corporate behemoth has poured money into some of Silicon Valley’s biggest names and hottest new ventures, from AI to biotech, through its $100-billion Vision Fund.

It reported Japan’s biggest ever annual net profit in 2020-21, driven by tech share rallies as people moved their lives online during the coronavirus pandemic.

The merger of U.S. telecoms operators Sprint — which was controlled by SoftBank Group — and T-Mobile was completed in April 2020, releasing more than ¥700 billion ($6.3 billion) in net income, the conglomerate said Tuesday.

Net profit in the three months to June 2021 was ¥761.5 billion, compared with ¥1.26 trillion in the first quarter of last year.

SoftBank’s investment approach means large transactions can cause unpredictable fluctuations in its results, said Mariko Semetko, senior credit officer at Moody’s Japan.

“Last year’s record high follows the previous year’s record loss, and signifies the highly volatile nature of the company’s business,” she said.

“The company has a very fluid and complex capital structure, and unlisted investments and private financings that have limited transparency and are frequently collateralized. Its investment approach results in high governance risks.”

In 2019-20, SoftBank reported a net loss of ¥961.6 billion — its worst ever — as the start of the pandemic compounded woes caused by its investment in troubled office-sharing start-up WeWork.

But it quickly returned to profit as the impact of COVID-19 lockdowns worked largely in its favour.

In the first quarter of the current fiscal year, the telecoms firm-turned-investment giant’s total gain on investments came to ¥1.26 trillion, a year-on-year increase of around 28%.

Gains were led by rises in the share prices of Chinese ride-sharing giant Didi Chuxing and U.S. food delivery app DoorDash, and partially offset by losses including of South Korean e-commerce giant Coupang.

Analysts said before the earnings release that it was too early for Tuesday’s results to reflect the impact of a recent crackdown on Didi and other U.S.-listed tech firms by Chinese authorities.

In early July, after Didi went ahead with a contentious New York IPO, Beijing announced a probe into the company citing cybersecurity concerns, and ordered its app be removed from stores.

Unlike in the previous quarter, SoftBank Group did not list big names Facebook, Microsoft, Alphabet or Netflix in its portfolio of holdings, although it did list Amazon.

This does not necessarily mean the company has sold off its holdings in the U.S. firms, although it could signal a potential reduction in the number of shares held, despite recent record highs in tech stock prices.

As usual, SoftBank did not issue an annual forecast, with its business model increasingly dependent on often volatile stock market activity.

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