SoftBank Group Corp
TSE:9984
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
5 652
11 920
|
| Price Target |
|
We'll email you a reminder when the closing price reaches JPY.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
SoftBank Group Corp
You don't have any saved screeners yet
Thank you very much for waiting. Good evening, everyone. Now we'd like to start the SoftBank Group Corporation earnings Investor Briefing for the 9-month period ended December 31, 2022. First of all, I'd like to introduce representatives from the SoftBank. We have Mr. Yoshimitsu Goto, Board Director and CFO; Ms. Kazuko Kimiwada, Corporate Officer, Senior Vice President, Head of Accounting; Mr. Navneet Govil, CFO, Member of the Executive Committee, SB Global Advisors. Mr. Ian Thorton, IR Vice President at Arm is also with us to take on related questions at the Q&A session.
This briefing starts with an overview of our consolidated results by Ms. Kimiwada financial update by Mr. Goto, followed by SoftBank Vision Fund update by Mr. Govil.
Simultaneous interpretation service is available and you can choose either English or Japanese.
Please note that if you do not select the language, you will hear the speakers original voice without interpretation. We are taking questions in both English and Japanese on Zoom after the presentation. Today's material is available on our IR website.
Now I'd like to invite Ms. Kimiwada to talk about consolidated results. Ms. Kimiwada, please.
[Interpreted] Thank you very much. My name is Kimiwada. Let me walk you through our consolidated results. Page 2 of accounting section. This was announced earlier today, the summary of consolidated results.
For 9 months, we posted a net loss of JPY 912 billion, or income before income tax was negative JPY 290 billion. If we look at this from an investment perspective, investment business of holding companies listed gain of JPY 3.6 trillion, mainly driven by Alibaba transaction. And SoftBank Vision Funds posted over $ 5 trillion (sic) [ JPY 5 trillion ] [indiscernible] of loss, and we will touch upon that later by Navneet.
Please go to Page 3, change in reportable segments. In FY '21, Latin America Fund segment was independent segment, but now it's integrated in SoftBank Vision Fund segment. As for PayPay. PayPay remains our subsidiary. And now PayPay become subsidiary of SoftBank and Z Holdings as well. So now SoftBank segment includes PayPay. And we did retroactive adjustment for you to make apple-to-apple comparison.
SoftBank KK announced earnings results earlier and they recorded remeasurement gain of JPY 294 billion relating to business combination in FY '22 Quarter 3. This was at the level of SoftBank KK. From SBG's consolidation perspective, PayPay remained a subsidiary before and now, therefore, that had no impact and did not record remeasurement gain or amortization expenses.
And move on to next slide. Let me talk about Alibaba now from accounting perspective. This slide shows Alibaba transaction history. As of June 30, 2022, our ownership was 23.7%. That means Alibaba was equity method associate. So Alibaba's gain or loss was picked up by SoftBank Group. At that point, even though Alibaba was listed and change in their share prices was not directly reflected on our consolidated financial results. From August through September, we did early physical settlement of prepaid forward contracts. As a result, our ownership went down below 20%, then Alibaba was excluded from associate and their share prices are valued against a fair value.
And from scope perspective, it became other investments. As of December 31, 2022, our ownership is 13.5%.
Next slide shows Alibaba's amount recorded in balance sheet and history. On the left-hand side, blue part shows the period when Alibaba was equity method investment. And shaded part with the blue or orange is representing prepaid forward contracts. The orange part indicates Alibaba as investment securities.
Next slide, please. This shows Alibaba's shares and derivative financial assets. When Alibaba was equity method associate, Alibaba's share went up, then we suffered loss in our derivatives. But since it became investment securities, even though the share price went up, that was not reflected, but the part used for prepared forward contract, it's offset by valuation gain or loss of derivatives. From B/S perspective, A+B are shown including investment securities and derivative financial assets.
Next slide shows expected cash tax related to Alibaba's shares. We did early settlement of Alibaba shares in the third quarter, which resulted in huge gain. So we are in a position to pay cash tax. SBG's wholly owned subsidiary, which closed the book in September, paid cash tax of JPY 201 billion. And SBG stand-alone is one key party of the transaction. But SBG itself closed it's book as of end of March, and there are other transactions done Alibaba. So we never know until everything is closed. But our estimate, in terms of cash tax related to Alibaba's shares is about JPY 250 billion. We suffered loss in the past, and we have deferred a loss carried forward is effectively used. And JPY 250 billion of cash tax should be paid at the end of May 2023. But again, that's a rough estimate as of now. Once it's confirmed, we will make an announcement that's expected cash tax related to Alibaba's shares.
The next slide shows segment income for SoftBank Vision Funds. Again, details will be explained later in the session. But in summary, in the last 9 months, we are looking at investment loss of JPY 5 trillion, roughly. Vision Fund 1 has third-party investors. So whatever belongs to our third-party investors is JPY 1.1 trillion, which is excluded from our loss. So all in all, segment loss was JPY 4 trillion. This is just a big number [indiscernible] point of view.
Next slide is just for your reference. Moving on to Page 11. Segment income for investment business of holding companies. For Alibaba, I touched upon earlier. And for T-Mobile, I will touch upon a little bit later. But here, please pay attention to foreign exchange loss, which is loss of JPY 725 billion, mainly driven by weaker yen. SBG's receivables and payables in foreign denominated currencies, since we have more liabilities than assets, we are looking at loss from foreign exchanges. But now yen is getting stronger. We had the loss of JPY 1.1 trillion, but we are looking at fewer number of loss because -- or thanks to stronger yen since the last quarter.
T-Mobile shares, since September, we haven't seen any specific movement.
Next slide shows T-Mobile shares -- our holding of T-Mobile shares. To be specific, maybe it's hard to see the bars on the slide. On the far right, as of the end of third quarter, $4,490 million is number there. Number of shares subject to call options held by Deutsche Telekom was 35 million. And $672 million is out of scope of that Deutsche Telekom's call option. And all in all, $5.1 trillion was recorded as of end of the third quarter.
Next slide shows fair value of Deutsche Telekom shares.
Next slide shows fair value of contingent consideration related to T-Mobile shares. This has been recorded since the transaction between Sprint and T-Mobile. Contingent consideration is, just to remind you, the company's right to acquire for 48.8 million T-Mobile shares for no additional consideration. If certain conditions are met, those conditions are 45-day trading view up of T-Mobile share exceeds $150 during April 1, 2022 through December 31, 2025. Every quarter, the fair value is reflected on our book.
As of end of third quarter, the fair value was JPY 5.9 billion. For your reference, the end price of stock on February 3 was $145.
Next slide shows loans, guarantees, loan facilities to WeWork in terms of our investment. WeWork's bonds are available in the market and credit spread got worsened in the quarter. And we expected credit losses and unsecured notes issued by WeWork with a face value $1.65 billion held by SBG. Other finance assets in terms of account was 544.
In the 9 months, $790 million loss was recorded as provision for allowance for doubtful accounts. And #2 and #3 in the chart include #2, credit support by SBG and SVF2. On the liability side, as of end of December, $855 million was recorded. And in terms of PL, the loss was $735 million. Commitment by SVF2 to acquire senior secured notes to be issued by WeWork. Allowance was recorded at $251 million, mostly recorded in the third quarter. So total, as of December ended last recorder was JPY 250.6 billion.
And breakdown by segment was shown at the bottom. Investment business of holding company segment recorded JPY 237.5 billion. Next slide shows consolidated P/L summary for your reference.
Next slide shows consolidated summary. So again, when you have time, please have a look at that. Investment securities on consolidated as is shown on this slide, Page 19. Vision Fund is excluded from here. So investment securities other than SVF is here, mainly Alibaba, which is over JPY 4 trillion. T-Mobile and Deutsche Telekom, those are major investment securities that we have. And also we have Lemonade, NVIDIA and others, others JPY 908 billion, so a lot of small stuff are combined here as others.
And the next slide shows breakdown of goodwill and intangible assets. In the third quarter, we don't see anything new, but we are doing amortization on a regular basis. And goodwill, due to impact by foreign exchanges, the number in yen terms has changed. I'm talking about Arm's apart. And consolidated summary is shown on Page 21.
And Page 22 is equity. If you take a look at treasury stock, we announced that, that will be retired by March end.
In Page 23, 24 are just an illustration of foreign exchange changes and impact. And Page 25 shows cash flow. Just one thing to highlight, even though you may already know this. Prepaid forward contracts was signed with Alibaba. At that point, from a cash flow perspective, it was a cash inflow in investment -- excuse me, financing activities. It's shown with pink underlying and the physical settlement of prepaid forward is noncash transaction. So this has no impact on the cash flow.
And next slide shows co-investment program to SVF2, and related party transactions. This is disclosed on a quarterly basis. At the moment, Mr. Son's, as of end of third quarter is 0, because of underperformance of SoftBank Vision Fund. From our perspective, we have receivables, and also, we have premier receivables that contribute to a bigger number in dollar terms.
Next slide shows income taxes paid on a consolidated basis. This is available on the website, but this is just a reminder for you. SoftBank Group, SBG is not an operating company like SoftBank KK. So it's not stable every quarter. But whenever we have a gain from investments, we pay taxes. For example, FY '19, FY '20, FY '21, depending on how much we gained we paid taxes accordingly.
Next slide shows characteristics of SoftBank Group taxation, which is available on our website. That's all for myself. Thank you very much.
Thank you. Next, Mr. Goto will give you the financial update. Mr. Goto, please?
[Interpreted] This is Goto speaking. Thank you very much for your time today. And we would like to go on to my section. For this third quarter, this is a summary. One of the most important KPIs, net asset value, loan-to-value, cash positions. First, net asset value of about JPY 14 trillion. Compared with the second quarter, about JPY 3 trillion decrease, of which about half of that, which is about JPY 1.5 trillion, is due to ForEx impact. So it's nothing to do with the fundamentals of the portfolios. So the remaining, the 50% are due to the portfolio companies' performance.
Loan-to-value, 18.2%. I have been keep telling, this 25% of threshold, which 25% is already a very safe level, and we are far below that threshold. We are on teens, so that I think that we are more than safe. And compared with second quarter, 3.2% point increase, of which 2.1% is due to ForEx impact. Cash position, JPY 3.8 trillion. Compared with second quarter, a decrease by JPY 0.5 trillion. But at the same time, we have already -- we made some repayments of the debt to improve and enhance our balance sheet.
Financing activities for this 9 months period. For financing, we had a monetization going, asset-backed financing, mainly using Alibaba's shares raised by $6.1 billion. And for the domestic retail bond, it was planned to redeemed -- and we rolled and refinanced and issued the domestic retail bond. And we were able to raise by JPY 385 billion. On the other hand, for the foreign bonds, hybrid bonds, senior bonds, where market is widened due to the environment in the past few months. So at the time, it was right that we bought back those bonds, [ $2.3 ] billion, which is quite a large amount. And we are securing this liquidity of the market, and, at the same time, that, I believe, it was quite a good offer for the market.
Alibaba shares, we've been using its shares basically forward sales, color settlements, has been done in the past few years. And for those prepaid forward contract as a physical settlement, about JPY 1 trillion or JPY 6.9 billion has been done. And shareholder return was that we have completed share buyback of JPY 1.4 trillion. November 2021, almost a year and 2 months ago that we have resolved JPY 1 trillion buyback program and also JPY 400 billion for the August 2022. Both of them has been completed during this quarter.
Loan-to-value, this is one of the most important KPI for our company. Once again, 18.2%. As I mentioned earlier, excluding ForEx impact, it was 16.1%. So once again, we are in a very healthy situations. And the impact of changes in ForEx rate is shown here. If you look at the currency of our holdings, about 86% are the U.S. dollars, Japanese yen 13% and about 1% are the euro currency, which means majority of our investments are done by U.S. dollars. So -- and, at the same time, monetizations are mainly U.S. dollars, too.
So as you can see, this distribution, September end to December end ForEx impact because there were 8% weaker U.S. dollar against Japanese yen from the September into December, and therefore, impact to the net asset value was JPY 1.5 trillion and 2.1% widened in loan to value. And these are the main finance activities in 2022 third quarter, $2.3 billion of the buyback, which is about JPY 320 billion, of which $750 million was hybrid notes. That's for hybrid. I would like to dive in a little bit more in detail.
In the domestic senior retail bonds, $2.4 billion redemption was made and the refinance has been offered to the investors and demand was very much well. As a result, we were able to raise 380 -- excuse me, JPY 385 billion, which is increased by JPY 50 billion. Asset-backed financing forward transactions, $6.1 billion raised, in Japanese yen, JPY 857 billion. Also, we had a physical settlement of prepaid for the contracts, $6.9 billion.
As a result of those financing activities, we were able to have very ample liquidity, JPY 3.8 trillion. In addition to the liquidity of cash of the JPY 3.1 trillion, we have JPY 646 billion of the undrawn credit facility. And as we have as a financing policy that we would like to keep our cash position to cover over 2-year equivalents of the bond redemption. And actually, this is more than 4 years of the covering of the bond redemption for -- with this cash position. If environment is good, we shouldn't be -- we should not have been keeping such a liquidity enhance because that means that there's going to be loss of the opportunities. And as for the corporate bonds, in December last year, we have issued retail bond, domestic retail bond. And we were actually very well received. And for the retail investors in domestic market, 2.84% per annum, 7-year term in Japanese yen, AAA, AA rating issuers, then interest rate can be cheap, much cheaper. But as a single A minus rating in the retail [indiscernible]. So this is 2.84%, which was quite good demand for the investors.
From the overseas investments point of view, they understand that the Japanese yen bond issuance is much cheaper in terms of the cost. And this was sold to the retail investors through securities firm and very much close to 100,000 investors were accessed for this retail bond. And this market, retail bond market, we have started accessing since 2005, and we've been fully utilized this market. And actually, it was actually provided or offered as a kind of a commodity type of the financial instrument.
And so far, we have issued JPY 7.1 trillion in cumulative amount wise, of which JPY 3.6 trillion has been redeemed. And we've been actually repeatedly bought by similar type of the investors. And as of today, we have about 510,000 number of holders, and the cumulative number of investors in bonds sold is approximately 1.5 million investors. So through such instruments, we would like to keep accessing to the retail investors because they -- their majority or the -- most of the financing activities or their assets are in deposits. Therefore, we believe that we are contributing to access to such markets so that they will be able to utilize such. And this is the Japanese retail bond market itself.
And since the JPY 2 trillion back in 2005 has grown to JPY 7.8 trillion in 2022. So this is almost 4x increase in the -- in cumulative wise, we have issued about JPY 7 trillion. So I believe that we are playing quite a good role here in this market. And also those investors distributions are shown here, originally start with 0, almost 0 for the retail investors has now increased to 6.4%. So I believe the ratio of retail investors increasing by 3x.
For retail investors, they have cash, they have deposits. Those are the kind of main cause of scenario for their financing activities, and that they cannot really jump on to the equity investing or bond investing something like that. There are some system changes and now that it's much beneficial, but still not fully utilized, so that the retail bond type of instruments can be good for retail investors and can be a good liquidity for the market, which we believe is going to make a very good role for the market overall.
And this is the bond redemption schedule. Roughly speaking, we have about JPY 1 trillion level of the redemption every year. And once we have any new issuance then we try to figure out the kind of less amount for the redemption such as fiscal '27 or fiscal '30 so that we can kind of normalize the redemption schedules over years so that we can keep the good balance of the redemption investments in the bond redemptions.
This year we are expecting one event to come. On July 19, this year, we have -- we are expecting first call for the hybrid -- U.S. dollar-denominated hybrid notes. This product start with 6% of the interest rate. It's perpetual, but non-call 6 years. And this being actually accepted equity treatment by rating agencies for 50% by S&P and JCR, and the outstanding balance is about JPY 1.3 trillion, and they -- this has equity treatments. And there are so many questions from the existing investors. Are you really calling at the first call date.
And we've been asked so many times in the past, and I've been answering that we are calling it for so many times. So even you can ask me whether we're going to make a call for the first call, I just say, yes, and we are keeping our words. I understand that you guys are asking me about are we going to call? Because the interest rate is increasing over the past years and if we refinance this bond is exactly the same instruments, then it can be not 6%, but can be 10% or 11%, something like that, which was going to be much cost heavy for the company.
So in that case, you may expect that we do not -- call is going to be better from the economical point of view. So that's the kind of the reason why that these questions are frequently asked, but we actually would like to keep the appropriate level of leverage so that we can maximize the value for the shareholders or the value of the shares. So that here, we would like to make sure that we keep the good relationship with the investors markets. We don't want to break our worse and lose our trust on those relationships, therefore, this is non-call 6 years, and we will make a call at the first call date.
As I explained, cash position is very ample. We can repay in cash as well if we wish to. However, as there are some terms with rating agencies. As far as we refinance with similar type of the products then we can be able to maintain our equity treatments. If we repay in cash because these products are long-dated products, which was actually regarded from rating agencies that they can value this as equity treatments. Therefore, if we repay in cash then that's going to be just the same as a 6-year bond. And the rating agency may feel that, that's not the way that we are originally thought to providing the equity treatment. That's why that we would like to refinance this with a similar type of products.
If we do in the foreign currency, it's going to be cost heavy for us. But if we re-finance in domestic market, it's something doable for us. And as long as it's hybrid bond, not only the bond, but the loan products can be something valued for the equity treatment by the rating agencies.
At this moment, we have not yet decided anything. We are in preparation, but looking into the domestic market, and also, we would like to explore every opportunities for the foreign market as well, considering the cost and all the aspects for us.
From here on, it shows credit and interest rate spread in secondary market for the first quarter and the second quarter. You saw it's been widened at the time. But since the autumn to winter timeframe, that's been kind of calming down and the senior spread is actually improved to the level in spring last year. On your right-hand side, CDS, we experienced very much close to 600 bps, but now that they're coming back to the level of 200 bps. Interest rate, U.S. 10-year bond, as of February '23, 3.4%.
Looking at these 30 to 40 years, this is not that high, but in a short-term period, it's quite a big jump. And on your right-hand side is the Japan -- Japanese bond for 10 year and swap yield. It's kind of the number magic so that it looks like a 3x or 4x only looking at numbers, however, the absolute figure itself is very small, so that I don't think that this is high. But actually, as a trend wise, it is increasing trend so that we do need to pay attention to it very closely.
And our interest bearing debt in dollars, a floating rate and fixed rate, you see our interest-bearing debt of 85% are fixed rate. So even there is any rate rise in U.S. or in Japan, it doesn't have a direct impact. And the 14% of the dollar financing is in floating rate. Dollar is more expensive than yen, but at the same time, JPY 3.8 trillion cash position and the majority are the deposit in U.S. dollars, and that also impacted from the rate. So if we net-net impact, it's going to be very minor. For Japanese yen, deposit interest is almost nothing so that even we may see some impact of the interest rate rise, but even 1%, it's going to be about JPY 7.8 billion interest payments increase. So that considering the volume of the debt and deposits, we believe that the impact is going to be very minor.
And here shows the gross debt as we are very much slowing down the investments so that we have reduced debt by JPY 1.2 trillion. This is exclusive -- excluding a non-recourse debt. And we are continuously reducing the debt, but at the same time, maintain a very ample cash position. And this is a gross debt and the cash. This cash gives you the net debt position, and compared to last term that it's been improved.
And Alibaba's share using -- used asset-backed financing, which was kind of a mainstream for the financing activities. And here, at the end of December, our ownership stake in Alibaba became 13.5%. Back in June this year was -- last year was 23.7%. And through the [indiscernible] transaction financing activities, has been reduced down to 13.5%.
In SoftBank Group portfolio, distribution movements here. On your left is the end of March last year, and on your right is December end last year. Main difference is Alibaba. Alibaba became almost half in terms of proportion and effective sales of derivative or forward transactions. So the overall amount is decreasing.
In the meantime, other asset's proportion is increasing. Right now, that the SBKK, the domestic mobile operations proportion is larger than Alibaba. And T-Mobile, Deutsche Telekom has increased from 12% to 16%, 5% to 8%, respectively. In the Vision Fund and the LatAm Funds maintained 43%. But the Vision Fund is not the only one investments for this 43% actually. There are about 500 investees through the Vision Fund 1 and 2. So this portion is actually -- can be breaking down to 500 companies.
One -- another focus by rating agencies is the ratio of public securities. On your left, 52% are the listed securities. And as we monetize Alibaba's share, public securities has decreased to 44%. So that can be the reason for negative watch by S&P and so on. Going forward, as an expectation-wise Arm is in preparation for IPO in 2023, so everything goes well, is going to be counted for listed shares. As a result, listed shares proportions can be exceeding 50%. That gives us even better balance of the distributions.
Share buyback. In third quarter, in the past 1 year, we've been working on this JPY 1 trillion program and JPY 400 billion program totaled JPY 1.4 trillion buyback has been completed this quarter. And when you look at the -- over 3 years, cumulative buyback was JPY 4 trillion. So as a level for the return to shareholders, I believe that this is quite a large size. And of course, this being a good benefit -- beneficial for the shareholders. But if we only buyback, it's not beneficial for the bondholders, quality investors, debt investors. It's going to be negative for those people. So we also like to improve and enhance our balance sheet. And, at the same time, having healthy balance sheet and also try to achieve the return to shareholders as much as possible so that we'll be able to make the both party happy. And we would like to keep such a balance going forward.
No change in financial policy. I've been keeping this slide for so many times. But just to recap, maintain loan-to-value below 25% in normal times and maintain at least 2-year worth of bond redemptions in cash and the secure recurring distributions and dividend income. That's all for the financing section. Thank you very much. That's all for the financing session. Thank you very much.
Thank you. Now Mr. Navneet Govil will give you an update on SoftBank Vision Fund. Navneet, please unmute, and it's all yours.
Hello, everyone. Thank you for joining us. Before we get started, please read the legal disclaimers on Slides 2 and 3 or refer to the online presentation for more details. As Slide 4 indicates, today, I'll summarize our key performance highlights and the financial impact for the December quarter. In the in-focus section, I'll provide an overview of our selective investing approach and disciplined monetization strategy. These tactics have embedded lasting resilience into our funds and have enabled us to adapt to shifting market conditions.
Let's begin with a summary of our progress along with some highlights from the last quarter. As you can see on the left-hand side of Slide 6, the economic challenges of 2022 had a substantial impact on the tech sector. The NASDAQ 100 Tech Sector Index and the Refinitiv Venture Capital Index fell 40% and 55%, respectively, and business leaders' confidence in the health of the economy markedly declined over the course of 2022.
Despite a tough macro environment, our portfolio continued to attract interest from third-party investors with over $16 billion in capital raised over the last 12 months across 87 funding rounds. Prioritizing balance sheet strength also embeds resilience across the portfolio. 94% of our investments have a runway of over 12 months. These companies have the necessary resources to build through hard times towards success. Our late-stage portfolio has a fair value of over $37 billion, with a cohort of companies well positioned for listing when public market sentiment improves. We'll drill into these themes in our in-focus section.
First, we'll review the resilience of our investment platform; second, we'll share how our portfolio companies are utilizing corporate strategies to grow and consolidate market share; lastly, we'll highlight our monetization approach through changing market conditions.
Slide 7 shows our performance snapshot at the fund level. While volatility has subsided slightly towards the end of the year, markets remained weak, continuing to impact both listed and private valuations and weighing on our quarterly performance. The total fair value of our portfolio is $139.8 billion, and we now have made a total of $53.4 billion in distributions to our limited partners. We've talked before about the importance of discipline in delivering exits when market prices were constructed between 2018 and 2021. These returns have enabled us to continue to make distributions to our limited partners. The majority of returns have come from Vision Fund 1.
Slide 8 shows that since inception, through the end of the December quarter, we made a total of $44.2 billion in distributions from Vision Fund 1, including the return of $9.1 billion in equity gains and payment of preferred equity coupons.
Slide 9 summarizes the fundraising activity of our private portfolio companies in 2022. As I mentioned earlier, there were 87 successful fundraising rounds in the past year, raising over $16 billion. 92% of those were up rounds, quite an achievement in a capital-scarce environment, and reflective of the company's strong fundamentals and continued growth prospects. As a long-term investor, it's important to observe the portfolio maturing over time. We look for companies that combine innovation with steady growing revenue streams and a clear and addressable market. 70% of our investments are now late-stage companies that generate over $250 million in annual revenue.
Sector diversification is another important driver of portfolio stability. In 2022, huge strides were made in the AI space. As we discussed last quarter, the applications of artificial intelligence are limitless. Beyond the appeal of breakthroughs and generative AI, the technology is being adopted and applied to multiple sectors.
Let's look at our investments across key sectors where AI is driving disruption and growth. Starting here on Slide 11, consumer and investments represent $38.8 billion of fair value. Our portfolio companies support retailers of all sizes and adapt to shifting consumer demands and preferences. Our investments include bike debts, the short-form video-sharing platform, and Lenskart, a prescription eyewear company that recommends lenses based on facial analysis.
Moving on to Slide 12. Enterprise represents $12.3 billion of fair value. To drive competitive advantage in the current economic environment, our portfolio companies continue to invest in new technologies, such as data management and security. Our enterprise investments include Contentsquare, which uses digital experience intelligence to help businesses understand user interactions, and Claroty, a cybersecurity platform.
Finally, Slide 13 illustrates that the fintech sector accounts for $9.8 billion in fair value as companies provide businesses and consumers with frictionless transaction experiences, financial management tools and new wealth-creation opportunities. Our portfolio companies in the sector include PayPay, Japan's leading payments platform, and Ofbusiness, a tech-enabled platform that facilitates raw material procurement and credit for small- and medium-sized enterprises.
Diversification of the fund level ensures that our investment platform captures the opportunities in transformational technologies across a variety of sectors, while providing balance and stability through market cycles. Last year, the blockchain and crypto sector experienced outsized volatility due to solvency challenges at some of the sector's biggest players.
Slide 14 outlines our cautious approach to investing in this nascent sector, insulating our portfolio from cryptocurrency volatility, while investing for a potential upside. Fund exposure to the sector is limited, representing less than 1% of our AUM, while direct exposure to crypto tokens is immaterial. We recognize that a nascent sector calls for a cautious, disciplined approach.
Regardless of volatility, we will continue to closely follow the blockchain and crypto sector with a picks and shovels approach, ensuring we are identifying new opportunities to transform the underlying infrastructure of multiple industries.
Before we begin the in-focus section, I'd like to summarize the financial impact of performance across Vision Funds 1 and 2 and the LatAm funds on SoftBank.
Beginning with Vision Fund 1, from inception to December 31, 2022, fund net profit was $2.8 billion, of which SoftBank's share was $1.2 billion. The total contribution to SoftBank, net of third-party interest, was $2.2 billion. Continuing our focus on Vision Fund 1, here on Slide 17, I show the impact of fund performance on SoftBank. Total paid in capital is $27.7 billion, and total value to SoftBank is $28.9 billion.
Moving on to Vision Fund 2. Slide 18 shows equivalent data points showing the impact of fund performance on SoftBank. Total paid in capital is $49.1 billion, and total value to SoftBank is $33.1 billion.
Finally, Slide 19 presents equivalent data points for the LatAm funds, showing the impact of the fund's performance on SoftBank. Total paid in capital is $6.9 billion, and total value to SoftBank is $5.9 billion. In this quarter's in-focus section, I want to dive into the resilience of our investment platform and our discipline in the face of challenging market conditions. We believe that winning investors have a unique combination of conviction and risk management. We have structured our platform based on our strengths and our conviction in AI during times of volatility.
Let's begin with an overview of some of the key defensive measures integrated into our investment platform at both the portfolio company and fund level shown on Slide 21. In 2022, many of our portfolio companies pursued strategic opportunities from consolidation to partnerships to strengthen their business in the face of a potential economic downturn. As a result, companies across the portfolio are exhibiting sustainable revenue growth and benefiting from prudent operational and financial management.
At the fund level, we continue to prioritize diversification and disciplined monetization with a focus on keeping our distributions consistent. Let's take a look at each of these in more detail.
In 2022, we saw active consolidation in a challenging market environment. Slide 22 shows 12 examples of portfolio companies that pursued ways to improve economies of scale, expand into new markets, innovate products, access talent and diversify risks. Revolut purchased Arvog Forex, an India-based money transfer company, helping to strengthen the Revolut's foundation in India and offer multicurrency accounts to Indian customers. The acquisition supports Revolut's plans to offer a best-in-class remittance service and builds on the strength of its core business around the world.
Online retail management platform, CommerceIQ, acquired e.fundamentals to drive e-commerce growth of consumer packaged goods under a unified global software platform.
It's a difficult time for businesses, but the companies in our portfolio are seeking creative new ways to bolster their strengths. A number of portfolio companies sought strategic partnerships to create new synergies in their business models.
Slide 23 shows just a few examples of companies that have unlocked access to new markets, innovation and customer value by sharing and managing their infrastructure with capable strategic partners. Fanatics, the global leader in licensed sports merchandise, improved its value proposition for its customers by acquiring in-venue retail rights for the 2028 Olympics. Partnerships can also catalyze innovation. ElevateBio partnered with the University of Pittsburgh to create a new BioManufacturing Center. By sharing resources and infrastructure, they were able to accelerate innovation of cell and gene therapy for patients with devastating and life-threatening diseases. Additionally, the medical care provider, Cityblock, partnered with MDwise to deliver health care to historically underserved communities.
Slide 24 shows how portfolio companies across our investment platform are focusing on becoming more operationally and financially resilient. In today's environment, businesses are learning to achieve more with less, whether that's to strengthen company governance and culture, reexamine supply chains or make core processes more efficient. Last year, 69% of our portfolio companies improved their sales and marketing efficiency to support more sustainable growth.
As explained earlier, through fundraising activity across our portfolio, the companies we invest in have strong fundamentals and continue to attract capital from prestigious global investors. As a result, our portfolio companies are well positioned to weather the ongoing market fluctuations.
Slide 25 shows that over 99% of Vision Fund 1 portfolio companies by fair value have over 12 months of cash runway, while 90% of portfolio companies in Vision Fund 2 and 79% of portfolio companies in the LatAm funds have the same cash runway. The markets may continue to fluctuate, but our portfolio companies are prepared for the potential impact of today's conditions and are determined to continue growing.
We'll now take a closer look at the defensive measures we are employing at the fund level. Specifically, we will provide an overview of our monetization strategy and how we are focused on consistently returning capital to our investors through market cycles? At the fund level, we continue to focus on maximizing value across our portfolio and returning capital to our limited partners.
Slide 27 shows the drivers of our monetization strategy, which range from strategic and financial to opportunistic. Several factors determine these outcomes. First, asset-specific factors, including performance expectations, position, size and liquidity and investment risk profile. The second type are market and fund factors, including sector and geographic outlook, macroeconomic outlook and optimization of IRR and MOIC.
Slide 28 shows the liquidity and monetization events across our investment platform since inception, showing robust growth in cumulative proceeds year-over-year. Our strategic monetization during periods of market strength resulted in a $30 billion increase in cumulative proceeds from $16.5 billion in 2020 to $46 billion in 2021. In total, our liquidity and monetization track record includes the gross realized MOIC of 2x and 48 public listings. We've exited 44% of our public investments and 7% of our private investments.
As more of our companies mature, we are excited for the prospect of building on this strong track record.
There's a reason people talk about IPO windows. They open and they close. In 2022, we saw the IPO window closed significantly, but late-stage private companies that have shown resilience and growth will be primed for public listing as the market stabilizes.
Slide 29 shows that over $37 billion of fair value in our late-stage holdings, which includes a number of companies that are well positioned to list on the public market when the time is right. When evaluating public listing readiness, our portfolio companies consider 4 key factors to ensure a successful market entry: strong fundamentals, resilient business models, sustainable growth and a disciplined approach to governance, operations and financial management.
As a result of our defensive measures at all levels to preserve and grow the value of our portfolio, we continue to demonstrate a strong track record of returning capital.
Slide 30 shows that since inception, we've made $53.4 billion in cumulative distributions to our limited partners. Slide 30 also highlights the cumulative distributions and the percent of capital returned for each of the funds. In the 5 years since its launch, Vision Fund 1 has made $44.2 billion in cumulative distributions and returned 50% of capital. And we are already seeing distributions for Vision Fund 2 and LatAm funds, which are much younger funds.
Let's wrap up. Despite the challenges, 2022 was the year that artificial intelligence began its transition into mainstream consciousness, capturing the attention of millions. People all around the world watched with fascination as generative AI wrote stories, jokes and news articles and created original art. Son-san identified the AI revolution early on. And our belief and conviction in it has remained strong. We are primed to take full advantage of its growing application across sectors.
In 2023, we are confident that the wider interest in AI will drive further progress and disrupt entire sectors. Across our portfolio companies, we are seeing an increasing level of sophistication in applying AI to transform productivity and create new industries. In fact, the contribution of AI to the global economy is projected to reach $15.7 trillion by 2030. While cautious and deliberate, we feel well prepared for the changes that 2023 will bring through our selective investing approach, value optimization and disciplined monetization, we continue to evolve our investment platform to meet market opportunities.
As always, thank you for joining us today.
[Operator Instructions] Now we are happy to take questions on our earnings results briefing. And we will do our best to answer questions regarding Arm as well.
[Operator Instructions] Now we take questions in Japanese. For questions in English, we will take after we finish with Japanese questions. Any questions from Japanese audience?
First, Nagao-san from BofA Securities.
Accounting section, Page #9, SVF business performance. Maybe a question to Navneet even though it's related to Kimiwada-san's presentation. Our JPY 5 trillion investment loss is recorded since the quarter 1 investment -- excuse me, loss amount has been decreasing or getting smaller. Looking at public and private investment, maybe it's in recovery phase or improvement phase. I understand you have an ample cash position so I wonder if private investments markdown are fully reflected in the loss.
Our next question is Page 8 of accounting section, cash tax. Maybe I missed your explanation. JPY 250 billion of cash tax is after considering our loss carried forward?
The first question on Navneet, can you address that question, please?
So our valuations reflect the company performance as well as market multiples. So if you look at the first half of 2022, a lot of the write-downs we took reflected market multiples, especially with the performance of the public company comparables. What we saw in the second half of 2022 was a lot of the portfolio of companies revising their projections of growth and profitability given some of the macro headwinds.
So overall performance is hard to forecast. But what really matters in the case of our portfolio companies is the quality of the tech stack -- the technology stack, the size of the addressable market, unit economics and their ability to scale.
To your second question, JPY 250 billion of cash tax. It's after consideration of loss carried forward, that can be utilized.
[Foreign Language] So in Page 6 of the accounting that we have actually, the settlement in physical settlements has been done. But the accounting is in Page 6, JPY 373.8 for the physical settlement and actually, numbers with the Kimi-san's page and the Goto-san's page is not matches in numbers. So can you elaborate, please?
[Interpreted] Yes, JPY 373.8 billion. This is the second quarter end fair value at the time and the multiplied by number of shares. So this shows how much being decreased in book value-wise.
Understood. So in reality, $ 6.1 billion, $1 trillion, what's that mean?
[Interpreted] Yes, Goto-san speaking. So this is the actual -- this is a market value of actual settlements amount.
I see. In the JPY 86.3 billion of actual loss on accounting page of 6, what is that? On Note #4 unrealized valuation loss. I can get a follow-up with you on later. And my second question is to Navneet. So Vision Fund private securities has been showing quite a big valuation loss. And I understand this is due to the performance issue of this calendar year 2022 performance. Has that been revised for the performance so that the valuation has been marked down? Or is it because of the forecast of 2023 to kind of mark down? Has that been also including the 2023 forecast or is it only the actual performance 2022 for the markdown, which is that? Can you please answer that, Navneet?
Sure. So the valuations are always forward-looking. At the end of December, the valuations reflect the forecast for 2023 and beyond. And even though the private markets are slow to reflect some of the repricing, we have considered and taken into account the macro headwinds to reflect the adjusted forecast for the portfolio companies going forward.
Next question from English audience. Oliver Matthew, please, Mr. Matthew.
Two questions. First question, so Navneet, seems like you have quite conservative valuations for Vision Fund. But maybe if we look at the SoftBank share price, it seems like they're quite discounted by the market. So Goto-san, isn't it a good time to buy back shares and get discounted ARI stocks. You mentioned three scenarios, but they all show recovery. So is there some urgency around buybacks currently? That's the first question.
Second question, Navneet, could you confirm the outstanding preference portion in Vision Fund 1, please?
First, Goto-san speaks about our share buyback.
[Interpreted] Well, looking at the stock price, of course, discount is huge. And whether we have an urgency for share buyback or not. Well, it's difficult for me to answer clearly, to be honest. Share buyback itself we have been doing, but looking at the share price, especially recently, our stock price has been going up, whereas our discount is still wide. That's a fact. And like I said earlier in my presentation, we are looking at the balance of 2 big stakeholders, shareholders and bondholders, whereas we need to make a strategic investment. So while making sure we have a good balance, we need to make most appropriate decision. So we can't make a decision on share buyback only looking at share price or market condition.
So we communicate with the big stakeholders. And at this moment, as of today, we don't have any announcement of share buyback. But going forward, we will continue to discuss exploring opportunity for share buyback in the future.
And, Navneet?
If you take a look, regarding your question on preferred equity for Vision Fund I, please take a look at Slide 8 of my presentation. Of the $40 billion in preferred equity commitments, we drew $36.2 billion. We returned $18.6 billion. At the end of December, there is $17.6 billion of preferred equity outstanding.
[Interpreted] And Kimiwada-san speaking. Coming back to Matthew-san's question, let me answer that. We will be misleading complicated, but this is the loss for the settlement of share itself. However, derivative-wise, we do record again. That's how it explained. But let me try to express much better in the next time.
So for next question from English line. Atul Goyal, please mute and start your question.
Thank you very much. First question is for Goto-san. Going back to the previous slide where the Alibaba numbers were showing. In the December quarter, the stock price went up, but the value has gone down. So net-net, it looks like there were some more sales, specifically in the particular quarter -- outright sales or prepaid forward contracts. Can you clarify exactly what that amount is? And then I have another question for Navneet.
[Interpreted] So I believe that your question is about amount. Can you repeat your question once again? What amount are you asking for?
Yes. So this monetization, when you call it, because sometimes it's also margin loans against some of these assets. So the December quarter asset-backed finance, is this primarily prepaid forward contracts and no margin loans?
[Interpreted] currently is the only the forward $6.1 billion. Margin loan is not executed for Alibaba shares for now.
And my second question is for Navneet slightly more conceptual question. You talked about AI. If I look at the data sheet for third quarter, and I look at the Vision Fund investments, which are listed ones. And I look at the largest ones, Page 5 is what I'm looking at of the data sheet for the third quarter. So a 23-page document. The fair value is listed -- it's assorted by fair value. So the largest 1 is Coupang, which is e-commerce similar to Amazon. DiDi Global, which is ride-hailing, Grab Holdings also ride-hailing. So these are 3 of the biggest ones.
If I look on Vision Fund 2, AutoStore, WeWork are 2 of the biggest ones that are listed there. My own understanding is e-commerce, which is Amazon or even AWS, there's not much of AI in there. There is obviously matching of demand and supply, and humans don't do that, machines doing it. Same way stock exchanges have been matching demand supply for a long time. So if these ride-hailing companies are matching that, which of these exactly is AI investment per se?
Thank you for that, Atul. So AI, artificial intelligence is a general purpose technology. And the examples that you listed, these are companies that are basically where AI enables their business models. It essentially underpins them. And as you may recall, a lot of these investments were done in the early years, in 2017, 2018, when Son-san saw around the corners how artificial intelligence was entering mainstream. And these companies continue, whether it's -- you talked about supply-demand matching, there is pricing algorithms. There are a number of applications, and those applications continue to expand over time, which is why the companies -- some of the companies you listed have been doing very well, like Coupang, DoorDash and a bunch of others.
So by extension, would it be fair to say that the companies like Amazon and Google have been doing AI long before we started talking about AI because they've been doing all this things -- this mechanism is underpinning their business models for a very long time.
To some extent. And I think if you look at the companies we've invested in, these are truly disruptive, and they'll continue to leverage AI, Big Data, neural networks and then move to foundational models.
And is there any of these specific company -- any of the companies specifically addressing these 3 parts of natural language processing, speech recognition and machine vision? Any specific one, which is addressing these 3?
These are 3 of this, which you're referring to, Atul and generative AI is just one subset of mass application. It's very interesting, but it's not the only opportunity. And we continue to look at opportunities in the space more broadly.
[Foreign Language] you will have opportunities. So we have last question. I have a question to Navneet in the presentation material, Page 29, late-stage portfolio companies are shown here. Arm, of course, was touched upon and the earnings are briefing. And PayPay also, we have some understanding, but other companies, and revenue, profit, any changes or any trend, if you could elaborate on that, that would be great.
And also Fanatics, recently, valuation was up, but it's not included here. So Fanatics is not at the late stage yet? Is my understanding correct?
So I only listed 2 examples from each of the funds. They are -- the $37 billion late-stage value reflects about 30 companies in our portfolio, but we only listed 2 examples from each of the funds.
Bytedance and Fanatics, I think percentage is high. Can you share with us our fundamentals as much as possible, please?
So we don't go into specifics of each of the companies. But you mentioned Fanatics. Fanatics is one of the late-stage companies that is part of this $37 billion portfolio.
We are sorry. But in terms of time, we need to close investor briefing. Now thank you very much for joining us today.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]