SoftBank Group Corp. and its founder Masayoshi Son have spent the past five years writing checks totaling almost $140 billion to take stakes in nearly 400 startups in the belief that at least one will be successful enough to offer a sizeable return to investors. But with earnings further deteriorating, it’s time for SoftBank to offer those faithful followers its next big bet.
Over the past year, Son has given shareholders reason enough to have doubts, and the latest earnings announcement reiterates the point. The Vision Funds dropped a combined $5 billion in the December quarter and they’re net losers since inception. Son’s first Vision Fund, launched in 2017, is up $11 billion on investments of $89.6 billion, a modest 12% gain, the Japanese company reported recently. But the Vision Fund 2, which started two years later, is down $16.7 billion on $49.9 billion of acquisitions. What’s worse, while SoftBank Group holds only a third of the better-performing first fund, it owns almost the entirety of the latter.
That puts Son and SoftBank’s management team in a bind. SVF1 is due to expire in just six years, while SVF2 has an extra three years to find some winners. That’s not a lot of time for this basket of investments to hit stratospheric valuations and provide better returns than an investor could get from sticking their money in an S&P 500 ETF.