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Japan’s SoftBank Group Corp Chief Executive Masayoshi Son bows his head after his presentation at a news conference in Tokyo, Japan, Nov. 5, 2018. REUTERS/Kim Kyung-Hoon/

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HONG KONG, Aug 8 (Reuters Breakingviews) – In the British nursery rhyme, the Grand Old Duke of York marched his men up and down a hill to no effect. SoftBank Group (9984.T) evokes similar feelings of futility. When markets go up, so does the $67 billion group’s performance – not to mention the braggadocio of founder Masayoshi Son. With markets go down, as they did in the last three months, it reported a record $23 billion net loss. Son kept his presentation short, answered questions and talked of learning lessons.

Writedowns and realised losses in SoftBank’s venture capital-like Vision Funds accounted for the vast bulk of the hit. The company said cumulative gains from the funds had shrunk to 112.2 billion yen ($830 million) from 3.05 trillion yen as recently as March. Weak markets were the biggest single driver. But the scale of the losses suggests Vision Fund managers may have been as bearish as possible on some investments yet to be taken public. That produces an overly flattering performance if markets recover. But at least investors can worry less about more bad news down the line.

Uber Technologies (UBER.N), though, is a reminder that it can’t all be blamed on Wall Street wobbles. SoftBank’s bet on the ride-hailer was an example of its belief it could supercharge valuations by connecting its hundreds of holdings. Given an investment cost of $34.50, per a Vision Fund presentation, its exit at $41.47 a share implies a measly 5% internal rate of return, by Breakingviews calculations.

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Legendary investor Warren Buffett just asked investors to look past quarterly valuations after his Berkshire Hathaway vehicle took its own $44 billion bath. But Buffett famously enthuses about seeking bargains when prices have fallen. Son, who likes in good times to talk of long horizons, has drastically cut SoftBank’s investment rate. That doesn’t suggest he believes valuations will fully recover.

In the meantime, investors might want to draw their own lessons via a comparison of SoftBank to the Nasdaq Composite. Over the five-odd years since the first Vision Fund was formed, the tech-heavy U.S. index has produced a total return of 107% while SoftBank shares have produced a mere 31%. When the Duke of York’s men were halfway up, they were neither up nor down. That’s about the best that can be said of SoftBank right now.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

Follow @JennHughes13 on Twitter

CONTEXT NEWS

SoftBank Group on Aug. 8 reported a record $23 billion net loss for the three months to June, hurt by falling stock markets and a sharp weakening of the yen.

Losses from the group’s technology-focused Vision Funds totalled $21.6 billion.

SoftBank said it had exited its investment in ride-hailer Uber Technologies at an average price of $41.47 a share, Reuters reported.

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Editing by Ed Cropley and Oliver Taslic

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Thomson Reuters

Jennifer joined Breakingviews after three years as Reuters’ Asia Finance and Markets Editor. Prior to that, Jenn spent 18 years at the Financial Times covering various aspects of banking, finance and markets in London and New York before her move to Hong Kong in 2012. Jennifer has a BA in History from the University of Exeter and won a Knight-Bagehot fellowship to study at Columbia University, where she earned an MSc in Journalism studying alongside the MBA class.

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