SoftBank Group posted a $12 billion quarterly profit on Tuesday after reporting historic losses of $13 billion for its last fiscal year.Â
The recovery is largely down to rising valuations of SoftBank Vision Fund bets like Uber and Slack, which saw their share prices rally during the April to June quarter as U.S. tech stocks soared during the coronavirus pandemic.
The SoftBank Vision Fund, which reported an $18 billion loss last year, recorded an investment gain of $2.8 billion for this quarter.Â
"What a rebound," Hussein Kanji, a tech investor at Hoxton Ventures in London, told CNBC. "Paper valuations that fluctuate don't tell you as much as you'd think in the private markets. I think SoftBank is learning this the hard way. I'll take actual cash returns any day."
The Vision Fund's performance has been further bolstered by new stock market listings in the U.S.. Home insurance start-up Lemonade, which SoftBank backed with $300 million, is now valued at over $1 billion, for example.Â
SoftBank also increased its share price with a share buyback plan. In March, the company said it planned to sell $41 billion worth of assets to buy back shares in the company and reduce debt.
It reduced its stake in Alibaba and its Japanese telecoms unit. Now it's considering selling U.K. chip designer Arm, which it paid $32 billion for, to U.S. chip giant Nvidia, according to people familiar with the matter.Â
SoftBank Chief Executive Masayoshi Son confirmed that the company is looking into options for chip designer Arm on Tuesday, adding that he is considering selling part or all of Arm, or taking Arm public.Â
Vision Fund uncertainties
The first Vision Fund, launched by Son in 2017, shocked the tech investment community due to its sheer size. At $100 billion, it was several orders of magnitude larger than any other tech investment fund including those of Silicon Valley heavyweights like Sequoia and Andreessen Horowitz. More than half of the money comes from contributors like Apple, Qualcomm, Oracle founder Larry Ellison, and the Public Investment Fund of the Kingdom of Saudi Arabia. In less than three years, the Vision Fund has backed around 90 start-ups with over $75 billion.Â
In July 2019, SoftBank shocked tech investors again when it announced plans to create a $108 billion "Vision Fund 2" to invest in artificial intelligence (AI). The SoftBank Group pledged to commit $38 billion to Vision Fund 2, while Apple, Microsoft and Foxconn were all touted as external contributors that would commit the extra billions.
Vision Fund 2 is up and running but only with the $38 billion from the SoftBank Group. External investors decided to put their contributions on hold as they waited to see how the early Vision Fund investments turned out.Â