SoftBank Group Corp. (“SBG”) today reported a loss of JPY 669,540 million in its non-consolidated financial results (Japan GAAP) for the fiscal year ended March 31, 2022, as a result of an investment in listed stocks and other instruments by its asset management subsidiary, which included a loss on valuation of investments in consolidated and affiliated partnerships (Godo Kaisha) and provision of allowance for doubtful accounts, among other things.
As indicated in “2. Impact on SBG’s consolidated financial results,” there is no incremental impact on the consolidated financial results for the fiscal year ending March 31, 2022, from recognizing this loss in the non-consolidated financial results (Japan GAAP).
- A description of the valuation loss on investments in consolidated and linked partnerships, as well as the provision for doubtful accounts, is provided.
SB Northstar LP (“SB Northstar”) is an SBG asset management company that has been buying and selling listed stocks and other instruments, as well as engaging in derivative and credit transactions involving listed equities, with SBG excess funds. SBG indirectly owns 67 percent of SB Northstar, with Masayoshi Son, SBG’s Representative Director, Corporate Officer, Chairman & CEO, owning 33 percent. SBG had I invested in Delaware Project 1 L.L.C., Delaware Project 2 L.L.C., and Delaware Project 3 L.L.C. (collectively the Delaware Projects) as of March 31, 2022.
SB Northstar is funded by the Delaware Subsidiaries, and (ii) directly loaned a total of JPY 1,281,435 million to the Delaware Subsidiaries as entrusted money through its wholly-owned subsidiary Northstar Godo Kaisha. The arrangement for this entrusted fund states that if the Delaware Subsidiaries have any unfunded repayment commitments to SBG at the end of SB Northstar’s fund life (12 years + 2-year extension), Masayoshi Son will pay his pro rata share depending on his relative ownership percentage.
SB Northstar has been investing in listed stocks and other securities to diversify SBG’s assets and manage surplus funds since its inception in the second quarter of the fiscal year ending March 31, 2021. This was accomplished while adhering to SBG’s stated financial rules on loan-to-value (LTV) and cash position. SB Northstar, on the other hand, has suffered considerable investment losses (JPY 249.1 billion in the fiscal year ending March 31, 2022 and JPY 746.2 billion since inception) and is scaling down its operations to reallocate assets to SoftBank Vision Fund 2, which is currently SBG’s principal focus. Given these circumstances, SBG recorded a loss of JPY 39,793 million on the valuation of investments in Northstar Godo Kaisha (equivalent to the entire amount of SBG’s investment in the company) in the non-consolidated financial results for the fiscal year ended March 31, 2022 (Japan GAAP), as well as a provision of JPY 629,746 million for estimated uncollectible loans to the Delaware Subsidiaries (reduced by the estimated amount of compensation and other recoveries).
The JPY 629,746 million provisions for doubtful accounts and other liabilities reflect an estimated uncollectible amount of JPY 944,619 million for the balance of JPY 1,281,435 million in loans to the Delaware Subsidiaries, less an estimated compensation amount of JPY 314,873 million to be borne by Masayoshi Son based on the aforementioned agreement. The non-consolidated financial statements have been prepared in accordance with accounting standards for financial instruments, including offsetting loans and a provision for doubtful accounts of JPY 97,019 million, which is equal to the amount of uncollected interest and other income generated from the loans to date.
- SBG’s consolidated financial performance is affected
Investment gains and losses at SB Northstar are reflected in SBG’s quarterly IFRS consolidated financial results as gains and losses on investment at Investment Business of Holding Companies on the statement of income. Because Masayoshi Son’s interest and the amount comparable to the expected amount of remuneration are deducted as non-controlling interests from gain (loss) at SB Northstar, net income attributable to parent shareholders represents 67 percent of such investment gain (loss). As a result, recording the abovementioned loss on valuation of investments in consolidated and affiliated partnerships and provision of allowance for doubtful accounts and others in SBG’s non-consolidated financial results has no incremental impact on SBG’s consolidated financial results for the fiscal year ended March 31, 2022.
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