The Japanese tech conglomerate on Wednesday reported operating income of 2.59 billion yen ($23.6 million) for the three months ended in December, a plunge of 99% compared to the same period a year earlier.
Son confirmed at Wednesday’s earnings presentation that the fund’s recent poor performance — and the accompanying deluge of bad news — has spooked potential investors in his next mega tech fund.
“At the moment, I think that our next fund size should be a little bit smaller, because we have caused concerns and anxiety to a lot of people,” Son said.
Asked whether Vision Fund 2 could be funded entirely with SoftBank money, Son switched to English, saying: “We can make investment by ourselves. But we have partners who want to work with us, so we’d like to be flexible.”
Jefferies analyst Atul Goyal said that Son and other executives need to spend more time harnessing value from other assets.
SoftBank management “spends almost all of its time on (the Vision Fund) and investment securities,” Goyal wrote in a note on Tuesday, before the earnings report.
Son believes SoftBank shares trade at a discount of more than 50%, saying on Wednesday that they should be priced at 12,097 yen ($110).
SoftBank is also starting to feel some outside pressure. Earlier this month, activist investor Elliott Management revealed that it has built a “substantial” stake in the company, and is pushing for changes to improve its performance.
Son said that he had meetings with Elliott about two weeks ago, describing the discussion as “open” and “good.” SoftBank and Elliott are aligned on several issues, such as a share buyback and upping the number of independent board members, he said.
SoftBank’s board is comprised of 11 members, of which only two are classified as independent.
Elliott Management and many analysts who cover SoftBank also want better transparency on the Vision Fund.
The fund, which is mostly operated by London-based SoftBank Investment Advisors, is “regulated under UK law, so we of course follow all regulations for the fund’s operations,” Son said. “But we’d also like to offer more efforts for enhanced governance and transparency.”
Pushed for specifics on how Vision Fund investments are performing, Son said “almost 30 companies in the portfolio recorded a gain, and 30 or so companies recorded a loss, including non-listed companies.” He declined to give details on private companies, citing confidentiality agreements.
Shares in SoftBank rallied on the Sprint news, closing up 12% in Tokyo, ahead of the company’s earnings report.
Sprint “has been a major distraction for (SoftBank) since 2012,” Goyal said, adding that the merger and all the years Son spent trying to turn around Sprint has “brought little in terms of results.”
Offloading Sprint would remove some $44 billion of debt from SoftBank’s books.