“The storm has gotten stronger”: SoftBank facing tough times

Investment giant’s earnings dropped 97% in Q4 from last year

Masayoshi Son, chief executive officer, SoftBank (Getty Images, iStock/Illustration by Steven Dilakian for The Real Deal)
Masayoshi Son, chief executive officer, SoftBank (Getty Images, iStock/Illustration by Steven Dilakian for The Real Deal)

Sunny days at Japanese investment giant SoftBank are becoming harder to come by as clouds gather above the firm’s head.

In its fourth quarter earnings report released this week, SoftBank revealed quarterly earnings dropped 97 percent year-over-year, the New York Times reported. Shares in the company on the Tokyo stock exchange, meanwhile, are down more than half in the past year.

“The storm has not ended; the storm has gotten stronger,” said CEO Masayoshi Son during the earnings presentation.

The tough earnings report wasn’t the only bad news for the company this week. The conglomerate’s planned $40 billion sale of chip designer Arm to Nvidia fell through due to regulatory snags. SoftBank is looking at taking Arm, a prized asset, public instead.

Amid its recent swell of setbacks, the investment company turned out $251 million in the fourth quarter. The figure was significantly below its 2020 levels, but marked a slight tick back into profitability after a loss of $3.5 billion in the prior quarter, the Times reported.

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The failed deal for the chip maker came weeks after chief operating officer Marcelo Claure left SoftBank and WeWork after a disagreement about his request for a compensation package that could’ve reached $2 billion. He had been the COO of the investment company since 2018 after leading Sprint.

Claure was charged with leading some of the company’s most troubled investments, including arguably its most notorious in the United States: WeWork. Claure helped take the co-working company public last year via a special purpose acquisition company. The company still lost $802 million in the third quarter, displaying its profitability problems.

The company’s Latin American investment fund was also under Claure’s leadership. The Times reported he’s retaining his stake in potential profits of the fund, which are estimated to be worth $300 million to $400 million. His exit package reportedly included $30 million to $40 million in severance.

Part of SoftBank’s struggles relate to the larger sell-off in tech stocks. Shares in companies like Alibaba and DoorDash have plummeted in recent months. Still, not many people are crying for the investment giant.

“Even if they’re going through this pain at the moment, they’re still actually in the black,” New Street Research analyst Pierre Ferragu told the Times.

[NYT] — Holden Walter-Warner