SoftBank faces tech stock weakness at Q2 earnings

$SoftBank Group (ADR)(SFTBY.US)$ SoftBank Group Corp is expected to face further weakness in tech stocks when it reports second-quarter earnings on Friday, after two brutal quarters that have shaken Masayoshi Son's tech conglomerate.

The Vision Fund investing arm booked $50 billion in losses in the six months to end-June as valuations slid. Founder and Chief Executive Son has moved to cut headcount and refocus the second fund on managing its existing portfolio.

In the July-September quarter falling stocks included ridehailing and e-commerce firm GoTo and real estate broker Compass with e-commerce firm Coupang among the gainers.

SoftBank's portfolio also remains exposed to China, with companies including ridehailer Didi falling further during the second quarter. Alibaba $Alibaba(BABA.US)$ , which SoftBank has been selling to raise cash, has fallen more than 40% year-to-date.

The conglomerate offers limited visibility into its private asset valuations, but announced chunky writedowns across the two Vision Funds in August. Redex Research analyst Kirk Boodry estimates public portfolio losses of around $5 billion.

Although SoftBank briefings are centred on Son's presentations, which employ imagery such as a goose or unicorns, the billionaire will this quarter limit himself to opening remarks, with Chief Financial Officer Yoshimitsu Goto presenting.

The increased visibility for Son's long-time lieutenant Goto comes after an exodus of senior managers. Vision Fund's Chief Financial Officer Navneet Govil will also take the stage.

Son has outlined plans to list chip designer Arm in the United States after the sale to Nvidia $NVIDIA(NVDA.US)$ collapsed.

The Philadelphia SE Semiconductor Index is down about 40% year-to-date, with industry players such as $Taiwan Semiconductor(TSM.US)$ and SK Hynix cautious on chip demand.

SoftBank's own shares, by contrast, are up a fifth this year, compared with an almost 40% slide in the tech-heavy Nasdaq Composite.

The "outperformance leaves no upside," Jefferies analyst Atul Goyal wrote in a note last week, downgrading his rating on the stock to hold. "For most/all funding needs, SBG will use Alibaba shares to defend its balance sheet or stock price," Goyal wrote.