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The former Masayoshi Son once told employees in SoftBank’s internal working meeting: The valuation of startups is still soaring, and your investment is not aggressive enough.

However, on August 8 this year, 64-year-old Masayoshi Son publicly conducted a self-examination as the CEO of SoftBank. In what he described as a "frustrating" press conference, he said frankly: "I'm ashamed of my past profiteering.

He also publicly questioned the Vision Fund's "unicorn hunt" investment strategy. He said he wanted to use the fund to lay the foundation for its 300-year long-term development plan. "If we pursue our vision unilaterally, we risk a rout, which must be avoided at all costs."

A few short but helpless words seem to confirm that Masayoshi Son's famously aggressive global investment strategy is failing.

The news of SoftBank's huge losses in recent days has caused huge repercussions in the technology Internet circle, and Sun Zhengyi has once again eaten the bitter fruit he sowed.

According to various data in the financial report, a huge loss of 1.7 trillion yen in fiscal year 2021, a net loss of 3.16 trillion yen in the first quarter of fiscal year 2022, and an investment loss of 2.83 trillion yen in the first quarter, of which two Vision Funds lost 2.91 trillion yen. Trillions of yen... SoftBank, once an investment giant in the technology Internet industry, has now become the number one loser in the recession of technology stocks.

The Vision Fund has invested more than $135 billion in startups since 2017. In 2021, the fund invested $38 billion in 183 companies. But over the past year or so, SoftBank's "mercurial retrograde" has continued: WeWork collapsed on the eve of its IPO, Uber and Slack were listed in blood, satellite company OneWeb went bankrupt, Ali's market value plummeted...

Jiemian News once reported that after the WeWork thunderstorm, the contradiction between SoftBank and PIF and other LPs really broke out. Vision Fund 2 no longer lists the two major funders in the Middle East (Saudi Arabia’s Public Investment Fund PIF and Zabi Mubadala Investment Company) on the list of LPs, and the lack of external financing has made Sun Zhengyi’s arbitrary actions.

This also led to the performance of the Vision Fund 2 being worse than the turbulent Vision Fund 1.

According to the "Wall Street Journal" statistics, as of May this year, among the 209 investments made by SoftBank through the second phase of the Vision Fund, the invested companies have only conducted 13 listing transactions, of which 8 listed companies have fallen in market value since the beginning of this year. SoftBank’s stake in these listed companies is now worth less than its original investment.

In contrast, Vision Fund Phase 1, as of December 31 last year, 59% of the fund's invested capital has been withdrawn, and nearly one-third of the IPOs in the portfolio have been successfully completed in the fourth quarter of 2021.

The Wall Street Journal commented that if it wasn’t for Sun Zhengyi’s selfish desires, the Vision Fund could have advanced better.

SoftBank's investment collapse: it lost 139.7 billion last year, and it lost 146.5 billion in 3 months this year

On August 8, SoftBank released its financial report for the first quarter ended June 2022. The performance report showed that SoftBank had a net loss of 3.16 trillion yen (about 158 billion yuan) in the first quarter. , SoftBank Group has a net loss of 2.1 trillion yen.

In other words, this is already the second consecutive quarter of losses for SoftBank, and this loss also set the largest quarterly loss in history.

The main source of huge losses is still the unrealized investment gains and losses of the two SoftBank Vision Funds.

In this huge loss, the Vision Fund suffered a loss of 2.91 trillion yen (about 146.5 billion yuan). As of the end of June, both SoftBank Vision Funds have not returned their capital.

Specifically, as of the end of June 2022, the SoftBank Vision Fund I held 80 investment projects, and in the first quarter made an additional investment of US$60 million in existing targets. In the first quarter, the first phase of the fund realized a loss (net) of 30.5 billion yen; the portfolio valuation loss (unrealized) of 1.22 trillion yen.

The SoftBank Vision II Fund made new investments of US$2.11 billion and added existing investment projects in the first quarter. As of the end of June, the fund held 269 investment portfolios; it achieved an investment income of 3.3 billion yen in the first quarter. , the valuation loss (unrealized) of the portfolio is about 1.33 trillion yen.

In terms of individual stocks, companies with more losses include Ali, Korean e-commerce stock Coupang, SenseTime, food delivery platform DoorDash, Shell House, Wework, robotics company AutoStore Holdings Ltd, artificial intelligence company SenseTime Group Inc, etc.

At present, SoftBank Vision Funds I and II, as well as SoftBank Latin America Fund, have invested in 473 companies around the world. SoftBank said it had written down the value of unlisted assets of its two Vision Funds by 1.14 trillion yen.

Son and his team invested a total of $38 billion in 183 companies last year through SoftBank's Vision II Fund, according to SoftBank filings. Data show that as of the end of June this year, the shares of 269 companies held by the Vision II Fund were worth $37.2 billion, while the acquisition cost was $48.2 billion.

In fact, the predicament of investment losses was clearly evident in last year's full-year financial report.

On May 12 this year, SoftBank announced its annual report for fiscal year 2021 (April 1, 2021 - March 31, 2022). The financial report shows that SoftBank Group has a net loss of about 1.7 trillion yen (about 13.12 billion US dollars, 89.9 billion yuan) in fiscal 2021. Among them, the Vision Fund, which is responsible for the investment business of SoftBank Group, lost 2.64 trillion yen (about 26.2 billion US dollars, 139.7 billion yuan), setting a record loss.

The reason for SoftBank's huge losses is mainly due to the decline in the share prices of its listed portfolio companies.

Since 2021, Chinese concept stocks have experienced an unprecedented crisis, and domestic technology stocks have also continued to fall, with most companies' share prices halved.

There is no doubt that many Internet companies held by SoftBank Group have also experienced substantial share price declines.

In the first quarter of this year alone, the share price of South Korean e-commerce company Coupang fell by more than 70% from its listing price; Didi Chuxing's share price fell by more than 80% in the past six months; Alibaba's share price fell by more than 50%. In addition, Southeast Asian travel giant Grab fell 80%, and US food delivery company DoorDash fell 48%.

Last year’s financial report showed that the top three losses in the first phase of the Vision Fund came from Didi, Wework, and Grab.

The top three losses in the second phase of the Vision Fund came from Wework, Jingdong Logistics and Dingdong Maicai.

SoftBank is also shrinking on the investment side, affected by the value of its investments.

FY 2021. SoftBank made a total of 5.2 trillion yen ($46.2 billion) in investments. Among them, the investment amount in each quarter is 20.9 billion US dollars, 12.8 billion US dollars, 10.4 billion US dollars and 2.5 billion US dollars, showing a gradually decreasing trend, and only 2.5 billion US dollars were invested in the fourth quarter.

SoftBank is eager to put money into tech start-ups in 2021 as it sees new opportunities in businesses such as finance and healthcare emerging during the pandemic, the Wall Street Journal Chinese website reported.

As those investments start to lose money, Son has pledged to tighten investment standards and preserve cash to weather the downturn.

The dark thread behind the crisis: internal personnel turmoil, executives leave one after another

The loss of investment business is on the one hand, and Sun Zhengyi's right-hand man has left one after another, which may also be another dark thread behind this financial crisis.

According to statistics, in the past two years, personnel turmoil and power struggles within SoftBank have continued, and there is an intensifying trend.

Here's a little background first.

In 2019, SoftBank established the second phase of the Vision Fund, most of which is independently funded by SoftBank. At the end of 2020, growth stocks soared, and SoftBank reaped huge returns, with investments from U.S. food delivery platform DoorDash and South Korean e-commerce company Coupang at peak profits of more than $35 billion.

After seeing the lucrative return on investment of growth companies, Son Zhengyi asked employees to speed up the investment of the second phase of the fund. In 2021, the second fund will invest in a company almost every other day. In order to complete the target quickly, SoftBank has also reduced the requirements for due diligence and valuation of the target. There is even a standard that SoftBank encourages participation as long as there are at least two other top VC-backed companies.

The sales-style approach to investing reportedly displeased most executives and sparked a wave of departures. Among them, the entire American team, including Deep Nishar, Jeff Housenbold and Ervin Tu.

By early January this year, SoftBank Group Chief Operating Officer (COO) Marcelo Claure, who had been with SoftBank for nine years, also announced his departure.

At SoftBank, Claure is Son's main deputy and one of the potential successors. He served as the CEO of Wework in 2019 when its financial situation was very bad, and led SoftBank back to life. He can be described as Sun Zhengyi's right-hand man. According to the "Financial Times" report, in the past 10 years, whenever there is a problem with any of SoftBank's investments, Sun Zhengyi will come to him to discuss and solve it.

However, this hero has also been exposed to the controversial news of fake public welfare, and the reason for his departure is because of salary disputes. According to people familiar with the matter, Claure has been negotiating departure arrangements with SoftBank, but Claure asked SoftBank to pay $2 billion in compensation, which SoftBank could not accept.

After Claure resigned, Michel Combes succeeded him. However, after only 5 months in office, SoftBank quickly announced that Michelle Combes was stepping down, thus ending his 5-year SoftBank career.

The wave of departures continues at a time when SoftBank Group's prospects are cloudy.

In July of this year, Rajeev Misra, executive vice president of SoftBank Group and CEO of the "Vision Fund", also announced that he would fade out of SoftBank, giving up most of his titles and job responsibilities in the Vision Fund, and instead started a personal business. own investment fund.

Misra's exit is the departure of the most senior executive in SoftBank's investment arm. He was once the right-hand man of SoftBank founder Masayoshi Son and one of the core founders of SoftBank.

According to Jiemian News, Misra used peach news to drive away his fellow countryman, Alora, and had a long-term power conflict with SoftBank COO Claure. Inside SoftBank, the Deutsche Bank men who are close to him ganged up on various complex financial transactions, leaving a trail of chicken feathers. Misra, who has been a key executor of the Vision Fund's aggressive strategy, was at one point thought to be responsible for several major decision blunders in 2019. However, after Masayoshi Son staged a Jedi counterattack in the spring of 2021, Misra stabilized his position and started the unicorn sweeping model in his hometown again, creating at least 4 unicorn companies in India with Vision 2 within 6 months.

So far, with the withdrawal of Claure and Misra, and the former chief strategy officer of SoftBank Group and former Goldman Sachs executive Katsuki Sasuke, who had left last year, he was once regarded as the three potential successors of Sun Zhengyi, and all of them have been run away.

In addition to the three, other high-profile figures have recently left SoftBank, including SoftBank Group's chief compliance officer and a former Deutsche Bank trader who ran SoftBank's short-lived in-house hedge fund. Their reasons for leaving vary.

In August of this year, there were also media reports that two more managing partners of SoftBank Vision Fund were leaving, namely Yanni Pipilis and Munish Varma.

This comes after two of the three managing partners of SoftBank’s Latin America fund left in April. That same month, the head of the Vision Fund’s U.S. arm also left SoftBank.

It can be said that in the past two years, SoftBank has almost carried out a major purge of executives, and at the same time, most of the operators of the Vision Fund have lost most of them.

In 2021, Jeff Horsenbold, the managing partner who led investments in DoorDash and OpenDoor, decided to leave, and managing partner Fan Kunlun also announced his departure at the same time. Chief Operating Officer Ruwan Villasekela announced his retirement, along with Vision Fund partner Penny Bodell in charge of investor relations and Vision Fund UK Chief Risk Officer Maria Khan.

To a certain extent, frequent personnel turmoil at the top will further exacerbate business shocks.

The departure of senior executives who have made great contributions to SoftBank is a signal that SoftBank is in danger. And this wave after wave of executive departures coincided with the plunge in technology stocks, causing historic losses to the SoftBank Vision Fund.

Under the big loss, SoftBank started a frantic selling mode

SoftBank, which has suffered huge losses, is already in a crazy "self-rescue" mode.

“Over the past six months, the 7 trillion yen investment gains from SoftBank’s two Vision Funds have been almost wiped out. The losses are the largest in corporate history, and we take this very seriously.”

Son said SoftBank would now cut costs "significantly" across the group, on the one hand to slash costs for the Vision Fund, and on the other hand the way to cut costs would have to include layoffs.

He emphasized that the main strategies for the Vision Fund at this stage are: raising the standards for new investments, increasing the value of the current investment portfolio and reducing operating costs; and will continue to use its own funds and take greater risks to pursue the vision The goal.

In the most recent quarter, SoftBank wrote down 284 companies in its portfolio and only added 35 companies, according to reports. Son said SoftBank was severely limiting new investments. And SoftBank has started talks to sell Fortress Investment Group, the asset manager it acquired in 2017.

Leifeng.com learned that in the context of vigorous cost reductions, SoftBank quickly sold some or all of its 9% stake in SoFi Technologies, an online personal finance company, on the day the earnings report was released.

SoftBank sold about 5.4 million shares of SoFi Technologies on Aug. 5 at a weighted average price of $7.99, according to a filing with the U.S. Securities and Exchange Commission on Monday. On Monday, it sold another 6.7 million shares of SoFi Technologies at an average price of $8.17.

In addition, SoftBank has sold its entire remaining stake in ride-hailing giant Uber to raise cash. SoftBank sold about a third of its Uber stake last year, and now about two-thirds of the remaining shares have also been sold.

SoftBank said it sold all of its Uber shares at an average price of $41.47 per share sometime between April and July, at an average cost of $34.50 per share, so the company is to sell Uber shares at a profit. But SoftBank did not disclose how much the sale of Uber shares brought, or how many shares it sold.

However, SoftBank disclosed that between April and July, the company's stock sales, including Uber, online real estate company Opendoor, health care company Guardant and Shell, made a total of $5.6 billion in gains.

Earlier, foreign media reported that SoftBank Group has sold its 213 million Alibaba shares through forward contracts this year, accounting for about 1/3 of its holdings, and is expected to cash out about 22 billion US dollars.

Data shows that as of now, SoftBank has sold more than half of its Alibaba stock.

Epilogue

Masayoshi Son's investments are all over the world, and the "most powerful investor in Silicon Valley" has changed the rules of the game and is also facing backlash from the bursting of the bubble.

Looking at it now, the turmoil in the global capital market, the tightening of regulations in various countries, the Fed's interest rate hike, the impact of uncertainties such as the new crown epidemic may continue this storm.

At the same time, SoftBank's loss crisis is far from over. Sun Zhengyi, who has always liked to attack, also needs to calm down and think seriously at this time: How should SoftBank defend.