SoftBank is planning to lay off up to 30% of the employees at its Vision Funds. The development comes roughly a month after the company reported massive losses on startup investments across the two Vision Funds.
According to the Reuters report, the layoffs could be announced over the next two weeks and would also impact some of SoftBank’s US employees. The Vision Fund division had 349 employees at the end of March – the company’s filings showed.
The filings also revealed that SoftBank Vision Fund posted a loss of $32 billion in the fiscal year ended March which was 70% higher than the previous year and a new record for the Masayoshi Son-led company. The losses were roughly equally distributed between the two Vision funds.
SoftBank’s Vision Fund is among the leading private equity investors globally and has invested in a portfolio of diverse companies spread across the world.
However, startup valuations have plummeted pretty much around the globe with some exceptions – especially in AI companies.
In its earnings release, SoftBank said, “For private portfolio companies, the fair value decreased in a wide range of investments, mainly reflecting markdowns of weaker-performing companies and share price declines among market comparable companies.”
Notably, just about a couple of weeks after SoftBank’s earnings report, S&P Global Ratings lowered its rating by a notch from BB+ to BB – pushing the credit rating deeper into the junk category.
SoftBank lashed out at the rating agency and questioned its rationale for the credit rating downgrade.
SoftBank Looking at Laying Off Upto 30% Vision Fund Employees
So far, SoftBank hasn’t responded to the reports of it planning mass layoffs at Vision Funds. That said, global venture capital (VC) funding activity has been quite tepid over the last year.
According to CrunchBase, global VC funding fell 44% YoY to $22 billion in May. The funding slowdown impacted startups across the value chain including seed-stage, early-stage, and late-stage companies with the funding down between 41%-48%.
Talking specifically of SoftBank, between Vision Fund 1 and 2, it invested only $0.4 billion in the March quarter – the third consecutive quarter when the quarterly investment was below $1 billion.
During the heydays of the tech boom, it was not unusual for SoftBank to invest over $1 billion in a single company only.
Apart from the startup valuation slump, SoftBank is also reeling under the impact of China’s tech crackdown which led to a slump in many of its portfolio companies – especially Alibaba.
SoftBank held over a quarter of Alibaba shares three years back and was its biggest stockholder. However, amid China’s tech crackdown, it has sold most of the shares and filed to sell more shares through forward contracts.
The sale of Alibaba shares helped SoftBank offset some of the losses on its other startup investments.
SoftBank is Looking to List Arm Holdings
SoftBank has scaled back its investments into startups and is now focusing on listing Arm Holdings. The company’s efforts to sell the business to Nvidia failed and it subsequently confidential filed for an IPO in the US – looking to raise up to $10 billion from the listing.
Arm Holdings is based in London and the Rishi Sunak government tried to cajole SoftBank to list Arm Holdings in the country.
Sunak has been trying to pitch London as an attractive financial destination and an AI hub.
Sunak is Trying to Position UK as an AI Leader
In his keynote address at the London Tech Week yesterday, Sunak said, “It’s this government that’s building the most pro-investment tax regime, that’s increasing public R&D investment to record levels and that’s making our visa system for international talent one of the most competitive in the world.”
He added that the country is changing its listing rules to make it easier for companies to raise capital from the public markets.
That said, London’s image as a destination for tech listings received a beating when Arm Holdings ditched London and instead filed to list in the US.
As for SoftBank, the once aggressive private equity giant has been in a “defense” mode for quite some time as Son also admitted.
However, last month, it said that the company would try to “balance between defense and offense” – an indication that it might again scale up its investments.
