Shares in Softbank, the Japanese investment colossus, fell 8% after it reported a surprise fourth successive quarterly loss, in the same week that one of its biggest investments in recent year, WeWork, went bankrupt.
The net loss of ¥931 billion (US$6.2 billion, £5 billion) in the second quarter of its financial year reflected further writedowns of private market valuations in its portfolio, only partly offset by gains from the initial public offering (IPO) of Arm Holdings PLC (NASDAQ:ARM).
Analysts had on average expected a profit of ¥180.8 billion.
Revenue for the first half of the year has risen 4% to ¥2.93 trillion, with operating income up 6% to ¥514.4 billion.
This time last year, the sprawling conglomerate had posted a ¥3 trillion profit after selling a stake in Chinese giant Alibaba.
Both quarters this year have disappointed analysts, which had forecast a return to profitability for the Tokyo-based group.
Richard Berry, founder of the GoodMoneyGuide.com, said: “The blockbuster IPO of its UK-based subsidiary, the chip designer Arm Holdings, was a rare bright spot in SoftBank Group’s fourth successive quarter in the red."
He noted that WeWork's plunge has cost SoftBank more than US$11.5 billion in equity losses and “highlights the danger of what can happen when valuations are overinflated by early-stage players like SoftBank".
Berry said this problem is more common with US listings than those in London.
“UK IPO valuations tend to be more realistic, and the subsequent market response be less mercurial, perhaps because fund managers here tend to be more wary and less prone to wild optimism than their Wall Street colleagues," he said.
“This British stoicism may explain why VCs and even UK-based firms like Arm are increasingly choosing to list in New York rather than London. But for small investors, for whom an IPO may be their first opportunity to invest in a tech stock, it’s also a reminder that the risk/reward scale will often be higher in America than Britain.”