China's crackdown on its tech sector has hit SoftBank hard

Tokyo (AFP) - Japan’s SoftBank Group on Friday posted a net profit in the second quarter, partly thanks to gains from its recent reduction of its stake in Chinese e-commerce giant Alibaba.

The investment behemoth has made huge bets to find and grow new tech ventures around the world – making its earnings vulnerable to fickle market forces, and leading to dizzying highs and lows in recent years.

China’s crackdown on its tech sector has also hit SoftBank hard, because the Japanese group has long been a major shareholder in Alibaba and others such as ride-hailing giant Didi Chuxing.

In August, SoftBank announced it would sell down some of its shares in Alibaba, reducing its stake in the Chinese tech giant to around 15 percent from 24 percent.

This helped boost SoftBank’s earnings in the second quarter for a net profit of 3.03 trillion yen ($21.4 billion).

“The company’s voting ownership in Alibaba fell below 20 percent, and Alibaba was therefore excluded from the associates of the company,” SoftBank Group noted in a statement.

Over the first half of this financial year, however, it suffered a net loss of 129 billion yen, brought down by its record net loss in the first quarter.

SoftBank’s net loss in April to June was partly due to a global tech share rout triggered by interest-rate hikes by the US Fed and other central banks to tackle inflation.

These market losses caused painful drops in SoftBank’s investments in unicorn ventures, such as US food delivery app DoorDash and South Korean e-commerce brand Coupang, a broad trend that continued in the second quarter, SoftBank said.

CEO Masayoshi Son is known for his unconventional and often sanguine presentations at earnings announcements to highlight his vision and philosophy behind his decisions, such as investing generously in risky ventures like the troubled WeWork.

But in a change of tack for the company, Son will let his deputies do most of the talking at a post-results press conference later on Friday.

In 2021-22, SoftBank logged a record full-year net loss – having recorded Japan’s biggest-ever annual net profit the previous financial year.

To illustrate the financial woes of the Covid-19 pandemic, Son once displayed a drawing of horses trotting toward a “Valley of Coronavirus”, some staying at its bottom while others grew wings and horns to soar to the heavens as unicorns.

And at his last earnings announcement in August, Son showed a painting of a grimacing samurai warlord who suffered a major battlefield setback as he discussed deep losses that plagued his company.