Asian Tech Press -- Japanese investment giant SoftBank will hold off on new investments in China until the country's regulatory actions on the technology sector become clearer, founder and CEO Masayoshi Son said on Tuesday.
“Until the situation becomes clearer, we want to wait and see what happens," Sun said during an online press conference Tuesday, "In a year or two, I believe new rules will create a new situation."
SoftBank has invested billions of dollars in Chinese tech companies, including Internet giants such as DiDi Global Inc. (DIDI), ByteDance and Alibaba. However, China's antitrust regulation has brought big changes in the share prices of these companies, with Alibaba shares having fallen 14% since July.
Seven Chinese state departments previously jointly entered Didi to conduct a cybersecurity review, which also shrunk the value of SoftBank's investment in the Chinese top ride-hailing company.
According to SoftBank's earnings result for Q1 FY2021 released on Tuesday, net profit for the first quarter was 761.5 billion yen ($6.88 billion), a 61% plunge from the previous quarter and a 39.4% drop year on year.
The company's Vision Fund reported a profit of 236 billion yen ($2.13 billion) for the first quarter of the fiscal year, a 90% plunge from last quarter.
Notably, SoftBank recorded its first drop in quarterly net profit over five quarters. Last fiscal year, SoftBank posted the highest annual net profit ever in Japan as technology stocks rose due to a big increase in online activity, which was caused by the epidemic.
Since July, SoftBank shares have fallen 13%, failing to outperform Japan's Nikkei 225 and the U.S. Nasdaq Composite, and falling by one-third from the stock's highs in February and March this year.
The weaker-than-expected earnings and the changes of the stock price have cost Son his throne as the richest man in Japan. According to Forbes Real-Time Billionaires List, Son is the third richest man in Japan with $30.8 billion.
At one time, SoftBank's investments in China had brought it huge gains. When SoftBank reported record annual profits in May, executives noted that investments by SoftBank's Vision Fund, such as in Chinese ride-hailing giants Didi and trucking company Full Truck Alliance Co., would provide room for further profit growth.
But the risks SoftBank faces in China are underscored by the fact that some of the Chinese tech companies it invests in have gone public in the U.S. and subsequent regulatory action by Beijing has hit their valuations.
SoftBank has been actively investing in Chinese companies, and its stake in Chinese e-commerce giant Alibaba still represents 39% of the Hangzhou-based conglomerate's asset value. At fair value, Chinese startups make up 23% of the Vision Fund's portfolio.
The shift in regulatory policies has cast a shadow over SoftBank's investments in China. Since April this year, only 11% of the company's new investments have gone directly to China, said Son.
Navneet Govil, chief financial officer of Vision Fund, said in an interview that while the crackdown has affected returns expectations, "our broader thesis in China is unchanged: It's still a large, growing and compelling economic opportunity. "
Reporters called SB China Capital (SBCVC), an investment firm of SoftBank in China, staff said they have not yet received notice of the suspension of investment in China, and can not respond to the public.
