SoftBank Group Corp. (SFTBY) Q4 2023 Earnings Call Transcript

SoftBank Group Corp. (OTCPK:SFTBY) Q4 2023 Earnings Conference Call May 11, 2023 3:30 AM ET

Company Participants

Yoshimitsu Goto - Board Director and Chief Financial Officer

Kazuko Kimiwada - Senior Vice President and Head, Accounting Unit

Navneet Govil - Chief Financial Officer and Member of Executive Committee, SB Global Advisors

Conference Call Participants

Eriko Wada - Nikkei Newspaper

Kana Inagaki - Financial Times

Operator

Thank you very much for waiting everyone. Now we would like to start the SoftBank Group Corp. earnings results briefing for the fiscal year ended March 31, 2023. First of all, I would like to introduce today’s participants. From left, we have Yoshimitsu Goto, Board Director and CFO; Kazuko Kimiwada, Senior Vice President and Head of Accounting Unit; Navneet Govil, CFO Member of Executive Committee, SB Global Advisors and Deputy CEO, SB Investment Advisors.

Today’s briefing is live broadcast over Internet. Now I would like to invite Mr. Goto, Board Director and CFO, to present to you the earnings results and business overview. Mr. Goto, please.

Yoshimitsu Goto

Good afternoon everyone. Thank you very much for your time today. So let me dive into the summary of our fiscal year. And at the same time, I would like to give you some colors on our future strategies and so on. First, I would like to kind of look back the past 1 year. It’s been very unstable or 1 year. There are big geopolitical risk, including Russia situations, U.S. China situations, which are kind of expected status but we have not been able to see any improvements so far. And also towards the end of the fiscal year, we’ve been seeing the financial system instability, including Silicon Valley Bank, Credit Suisse and so on, which was unexpected event for all of us. But because of the change of such a big event – but at the same time, we’ve been keeping our defense mode, which actually been fully executed for this fiscal year.

But when it comes to the next fiscal year, on your left-hand side on the slide, we listed up the market environments, which we don’t see big changes. Fourth quarter, we may be able to see some signs of the improvement. However, we are not expecting that the fundamental resolutions or solutions for those issues. But on the right-hand side, evolution of technology, which we’ve been keeping our vision, which is AI era has been making a dramatical progress and making a big move around the world. And with those situations should we just keep in defense or should we have a balance with offence. So that’s kind of one agenda we have to analyze from the various angles.

So first, I would like to share with you our consolidated results for the past 1 year. Here, the net sales of consolidated results, we have a slight increase, JPY6.5 trillion. And as a holding company and also investment company, investment – profit and loss of investments is kind of a large impact for us. And year-on-year basis, increased by JPY2.6 trillion. It’s quite a big incrementals, but as a number for fiscal 2022, it’s still negative numbers here. And based on such a loss on investments, that also gives you the numbers for income before income tax and the net income.

So compared to the previous, it’s making incrementals. However, the number itself is still the negative and – but at the same time, I believe we do need to have a bit of colors on the loss on investments. So here, against gain and loss on investments for Vision Fund segment, last year, last fiscal year, fiscal 2021, we have a negative JPY3.6 trillion in fiscal ‘22, was even a bit more difficult year. So it was a negative JPY5 trillion as a loss on investment in fiscal 2022. So compared to 2021, it was even tougher. But at the same time, assortment groups, our own balance sheet investments-wise, have large shares in Alibaba in the transactions utilizing Alibaba share has gained us – gave us quite a good gain of JPY4.6 trillion, which I will touch on that later. But starting from 1999, we start the investments on this – in this company. And this is a kind of a good result that we’ve been able to receive after such an investment. So net-net, as a comparison for the gain and loss on investments, it’s been materially improved on a consolidated basis.

But the investment strategy, including SoftBank Vision Fund, has been lots of learnings, and we also need to study how we should be in offense mode for the future. And if you break it down by segment, maybe it’s much easier for you to understand. So investment business of holding companies, which is mainly contributed by Alibaba, JPY2.3 trillion incrementals compared to previous fiscal year. In the fiscal year ‘22, JPY3.3 trillion and the Vision Fund [indiscernible] segment, it was negative JPY4.3 trillion, which was minus – decreased – minus JPY1.7 trillion compared to the previous year.

So net income on consolidated base, I want you to see kind of a movement of the net income. By quarter basis, when it comes to Alibaba-related transaction, that has been recorded largely on the second quarter of last fiscal year. So this is something quite remarkable, so that we should put this aside the once. And first, you should do the comparison with the first quarter and also the third quarter, these are the kind of most difficult time for us. And compared to that moment, we believe that we’ll be making good improvements so far.

And for the ForEx, throughout the fiscal year, there was fluctuations but from the – for this fiscal year, it was relatively depreciated and that itself is actually – net asset value should be the biggest impact, but actually this was JPY1.3 trillion increase. And on a P&L basis, it’s about JPY0.8 billion negative, but the equity basis is JPY1.3 trillion increase on an accounting basis. So in total, ForEx was a kind of positive for our company.

And also interest rate. So I would like to emphasize this once again. Our company usually that many people think that we are the debt-heavy company. And if you are debt-heavy company, interest rate would be the negative for you. Increase in the net interest rate is negative for you. And I understand that many newspaper articles concern about us. But actually, we don’t have much impact from the interest rate raise because if you see about 77% of our debt is fixed rate, floating is about 23%, of which 14% is the U.S. dollar and 9% on a Japanese yen basis. So dollar – interest rate is hiking, but at the same time, the management rate is also high as well so that increase in the receivables of interest that actually giving us a positive.

And in Japanese yen, even increasing 1% in interest rate in Japan, but still impact is only JPY7.5 billion. So JPY7.5 billion means our – this is going to be very minor compared to our total huge kind of number of assets. And in addition, along with the increase in rates, fixed rate price is going to go down. So those bonds that we will be able to buy back by having a decrease in price, then that we’ll be able to gain from that gap. And that’s something that we’ve been working on for the past few months. And about – close to JPY50 billion of the gain on redemptions has been recorded for fiscal 2022. So there are several initiatives being taken place in agile basis for the past 1 year. So rate hike in macroeconomics point of view, there are many things to the market itself and also the equity market as well. For the impact to SoftBank Group Finance, it’s very minor as an impact wise.

Now let me talk about the Vision Fund, which I’m sure you’re interested in most. Vision Fund started in 2017. And at the close of FY ‘22, cumulative gain or loss and investment was JPY8.5 billion, lower than the book value, which we are disappointed, but we have to figure out how we can improve this trend. But if you take a look at the numbers, by quarter in the trend, on a consolidated basis, we presented previously, and likewise, Vision Fund, January to March, April to June last year were the toughest time and we have to record a lot of valuation loss. But at a certain point of time, we look at valuation very severely. But every quarter, the negative numbers have been smaller and smaller. So it’s coming back to the level that we started.

And we have Vision Fund 1 and 2, as you know, and first Vision Fund 1, we invested about JPY90 billion, which is shown on the left-hand side. And the cumulative investment return was over JPY101 billion. So we are looking at the positive trend here. If you look at left-hand side of investment, 70% already public and JPY34 billion private companies, which includes Arm. Vision Fund 1’s performance we will keep looking at and expect a lot from the investment of Vision Fund 1.

For Vision Fund 2, which is still facing a difficult time, it started 3 years ago, and they started investing 3, 2 years ago. And investment costs so far, JPY50 billion. And according to our conservative valuation, currently, fair value is around JPY31 billion. For Vision Fund 2 compared to Vision Fund 1, we have more diversified. We have varieties of portfolio companies. And after they go through the tough period, we will continue supporting them to make sure that they will turn around their businesses.

Looking back the last year, left hand side shows end of March 2022. Pie charts have three colors: blue, gray and red. Blue indicates gain, red indicates loss, gray indicates no change. And looking at the right-hand side, you see bigger pie chart portion has loss about is 73%. Looking at the portfolio companies that have lost their values, there are different reasons why they lost values. Performance of portfolio companies, market factors, and also rate change. Especially when it comes to value, private companies, it has impact because you have to apply discount for private companies. And they calculate based upon the interest rate. When interest rate goes up, then present value gets smaller. So all in all, the last 12 months have been very tough. And we have to learn a lesson from that.

Again, tough year. So we limited investment in such difficult period of time. We invested JPY2.2 billion in the first quarter, but after that, less than JPY1 billion. In 2021, 10x more investment we have made in 2020. Against the background, there were some successes in terms of stock offerings and monetization. As you can see here, there are four stock offerings. And on the right-hand side, it shows sales or monetization before listing or listed companies have been monetized. All in all, we are looking at JPY7.7 billion in terms of sales or monetization of the portfolio companies.

If you take a look at the period from January through March, combined fair value was JPY2.1 billion negative, but compared to first quarter and second quarter, JPY2.1 billion is very small in terms of negativity. Vision Fund 1, in fact, recorded plus. For Vision Fund 2 very tough because most of the portfolio companies are private, in fact, public investments drive Vision Fund 1’s a good performance. A lot of index turned positive in the last year, and we have to take this opportunity going forward. So again, the last quarter of 2022, the results were like this.

Vision Fund has invested in around 500 companies. And we get a lot of questions about financing against such tough market condition but 94% of portfolio companies are well capitalized. They have 12 first month runway. So overall, they have enough financial capabilities on their own. And also, valuation method remained the same. And late stage portfolio companies that are ready for listing with appropriate size is $37 billion, so those companies should give us high hope in terms of their growth opportunities. Since the inception of the fund, we keep disciplined monetization strategy because we have external third-party LPs. We need to make sure that we give back distribution and also for preferred stockholders, we want to repay the capital as soon as possible, so cumulative proceeds since inception is $56 billion.

Now we touch upon Arm. We have Navneet and Kimiwada-san with me today, and Arm’s Ian is not here today because they have come so far in terms of preparation for IPO. So we are not allowed to disclose a lot of things. But all in all, I can say Arm has been performing much better than we expected. In fact, 3-year CAGR is 16%. And in terms of adjusted EBITDA CAGR, 60 billion – excuse me, 60%. And the business model wise, Arm has unique strength. And Arm has attracted a lot of attention, and they have been performing so well in terms of finance. Recently, they submitted Form F-1, and after that, we are limited in terms of what we can say publicly. But again, I can say preparation for IPO is going smoothly.

And let me also give you a summary on fiscal 2022 initiatives. So environment, it stays stable. And when you look at the stock market trends, look at the over 1-year trends, you see the very bottom yellow graph is a venture capital index. So compared to the beginning of the year, it’s reduced – declined by 30%. In the very top, a little bit above, high volatility 1 which is a Golden Dragon on China. These are the Chinese companies index and still is showing about the decline by 10% or so. So in any market, it’s been a tough year for everyone.

In the past 1 year that we’ve been in defense and what did we do in terms of defense? First of all, we made a full effort in monetization in earlier schedule. The reason for making it earlier, that’s something that based on an experience but the equity whenever you monetize, the biggest risk is time. So if you have a shorter time that risk is smaller, if you wait longer, there will be a variety of factors may be impacting and made that difficult to monetize. Therefore, once we decide to monetize, we try to make quick movements, as quick as possible. That’s something that we’ve been thinking and we execute along with that thinking.

And even more important is to kind of slow down the investment activities. In the past 1 year, investment activities, was 1/10 compared to the previous year. The previous year, we invested about JPY5 trillion. And it was not that we had the same amount budget for this fiscal year. But compared to last year, that there were JPY5 trillion cash out in the last fiscal year and this year, it was 1/10 of the cash out. So that’s actually even more effective compared to the financing itself. And also, over a [indiscernible] organization because when the time of the investing in JPY5 trillion and at the time that we’re investing 1/10 of that, the organization needs to change and address the changes as well.

And at the same time, not only cash position, but also gross debt reduction is also important. So to show you the safetiness of our balance sheet, cash is not the only way that we can tell you the safetiness of our balance sheet, but also, we should be able to communicate to you our gross debt reductions so that that’s going to give you more comfort on our safetiness of our balance sheet. So those are the kind of main defense initiative that we’ve been doing. As a result, as you can see, these three indexes are always the most important indicators for us as an investment company.

When it comes to the different business or different company, of course, they have their own important indicator. But for us, of course, the margin is important for some companies. But as we are the investment company, so we believe these three indicators are the most important KPIs. Net asset value compared to last year amount has decreased from JPY18.5 trillion to JPY14.1 trillion, but you recall from the previous page by keeping a defense mode, loan-to-value has being improved from 20.4% to 11%. Cash position from JPY2.9 trillion to JPY5.1 trillion, largely increased here.

So this is a kind of our summary of the 1 year in the past and I would like to go through one by one. So, biggest reason for the net asset value decrease is the share price. So as I mentioned earlier, the ForEx impact is positive for us, but the valuation of each portfolio companies has declined. So that was a big impact for our net asset value. This slides, if it’s not a full year, it happened if it was only the fourth quarter. Actually, net asset value is increasing to – and also loan-to-value cash position is about the same as the full year. So, from the December end to – up to date that it’s been very much improvement and the change in net asset value, so the share price movements in a positive way, has been impacting to us and starting from 1998, over 25 years, net asset value history here. And these past 2 years, we have been seeing a big drop, but still JPY14.1 trillion.

So we have repeatedly seen the volatility, but at the same time, we are making good growth and that’s the kind of a strategy you have in our mind. Loan-to-value, I believe since we became this investment company style, I think that we’ve been – this is kind of the best improvements ever for the launch budget this time. So 25% is our financial policy number as a threshold. And this number is not something that that’s going to give us a big damage if we exceed or anything like that. The 25% is already very safe level, but we would like to make sure that we will be able to manage a company within a very safe level. So that is why that we kind of have this 25% as the threshold. And now we are in 11%. So that tells you how safe we are from the sense.

In the cash position of JPY5 trillion, I don’t recall this number actually in the history of our company. But with this cash position, JPY5.1 trillion and you can see this waterfall. A year ago, JPY2.9 trillion and we had a monetization program, ESSA executed JPY5.7 trillion and not that we have just accumulated, but we had some cash allocation, too. So we have reduced JPY2.4 trillion of the debt repayments. I believe JPY2.4 trillion is quite a large number that we can do for debt repayments. And here, that is actually return to the credit or the bond investors. And at the same time, we have done the buyback, which is the return to shareholders, new investments, JPY0.4 trillion so relatively small. So those 3 – JPY3.8 trillion has been used as a cash-out and still, we keep JPY5.1 trillion of the cash position with us.

So this is a breakdown of net asset value. What are our holdings? And how are those holdings being changed? So I just wanted to show you the kind of a 3-year history starting from 2021. So, orange portion has been decreasing dramatically. That’s something easy to tell. This is the Alibaba Holdings. Three years ago, we hold – we had a share in Alibaba 43% amongst our net asset. And that’s been monetized over years, and we have 5%. Because we have a forward contract, which settled in the year ahead or 2 years ahead, that means that, that is still with us as in our holdings. Others – but the agreement itself has already been made and concluded. So I believe that, that can be effectively monetized. As a result, other assets proportion, been increasing. So very – second from the bottom is the Vision Fund – is increasing Vision Fund portion. This dark blue portion is actually diversified almost 500 companies. So this is well diversified already. In that, we have above, T-Mobile and the Deutsche Telekoms and so on. So on – it is going to be a very liquid assets once they go public and the listed company T-Mobile, Deutsche Telekom is also – maintain – give us a good strength in terms of the liquidity as well.

Regions, looking at the geopolitical situation. This is also important to keep in mind. 3 years ago, investment in China was taken in account for about 50%. This is Alibaba and others. And as a result of some monetization, I believe that we’ve been well managed and balanced in terms of diversification amongst the regions. Now that the China’s proportion has been decreased down to 15%, and now we have more kind of proportions in U.S. and European countries now. Europe, Middle East and Africa looks a bit large because that also includes – In Alibaba, we pretty much gone through our monetization so that I would like to give you the kind of a summary for the investment in Alibaba.

First, investment. So the investment cost was JPY7.4 billion and over 22 years, it has grown to JPY9.7 trillion and gave us as a monetization. So over 22 years, IRR is 57%, which is a tremendous number, I believe. So IRR, if you sell immediately after you buy, then that you may have such a good number, but if we hold over 20 years and still keeping this 57% level of the IRR is surprising, I believe. And you see the very beginning of the investments handshaking between Jack and Masa, they are both young, aren’t they? And actually once that I joined SoftBank and the first foreign entrepreneur that I met was Jack Ma and also [indiscernible], they were just zero revenue back then, but they were actually full of energy and they are very positive about the market, and I was so impressed to see them. So that’s something that I remember, but I didn’t expect this much of the growth. And I think that Masa has a great eye to kind of pick them up to invest in. So defense is very much look solid.

So going forward, how we will operate in 2023. From defense-only year to offense year, we need to look at both external factors and internal factors. Latest market trend is shown here from December to March. Both NASDAQ and Venture Index exceeded 110. So it’s been showing great return. And looking at our portfolio, Vision Fund 1 and Vision Fund 2, although they are under NASDAQ, but still, they are performing well. And interest rate is tricky in the U.S. There is a lot of discussion what they are going to do going forward in terms of rate. Financial turmoil that is happening recently may slow down interest rate hike.

So from a stock market perspective, the climate might be better. And the volatility index has been sort of stabilized and geopolitical risk indicator, which is created by BlackRock. When a surprise risk takes place, you see a huge hike. For example, on the far right, when Russia invaded Ukraine, they had a huge peak. Even though trend wise line goes down, but that doesn’t mean there is no risk. But those risks have been factored in, then things should be stabilized. We showed you three, four charts. In the last quarter, we see sign of improvement. However, from our perspective, that’s not exactly the case because geopolitical risk, Russian, Ukraine, U.S., China flexion around China, unfortunately, those geopolitical risk in the last 1 year have not been addressed and we don’t see any solution. So we have to keep that risk in mind. Even though we see sign of improvement in the last 3 months, we can’t simply restart investment. That said, we have to look at the different aspects, which is technological evolution.

Since we founded our company, we wanted to make people happy through information revolution. And since we founded Vision Fund, what was our vision? AI revolution has being a part of our vision, always. AI can redefine every industry. And from that perspective, we want to identify and invest in opportunities. And a lot of things are happening and evolving now, especially visible recently is generative AI, which has been growing exponentially.

Sometime around 2017, we started using the term singularity. And even before that, 10 years ago, we released a 30-year vision, and we communicated the same message. We thought that it could take 10 years or 20 years, but now we are seeing much faster speed in terms of technological evolution, AI is finally come. Maybe some people are still skeptical, but we believe AI is finally here, even though there are some risks.

Like I said earlier, in 2017, when we announced the financial results, Mr. Son said, someday, we will see data being analyzed and reasoned about by AI. Back then, we didn’t know when it would come, but we said, we believe that day would come. And this image is a part of annual report released in that year. It says a singularity when AI versus human intelligence will be the biggest paradigm shift in human history. Again, AI is finally come, especially generative AI, there are a lot of developments going on around AI.

And what’s the trend? So for example, to reach 100 million user numbers, Facebook, Twitter, they spent 5, 6 years. But ChatGPT, only 2 months, within 2 months, they have reached 100 million user base. Of course, compared to those, the time of launch of Facebook, processing speed has been faster, payment speed faster, volume of the transaction became larger and the information volume has increased. So that’s also the factor. But at the same time, this is something that we have to accept or embrace as a reality. A variety of the development can be considered.

As you see here, just on one example, translation, customer data, data analysis. Those – by only entering into ChatGPT that you may have some answers from them in drawing or creating sentences or writing books that we don’t want to lose against AI, but AI have their own way to actually generate and produce such products. And also time line-wise, speed of gathering information to create the products, actually, that is the most effective in terms of way of working or a way of living and something that we may be able to take an advantage of.

So while we use, we do also need to find what are the issues. So improving productivity, addressing social issues, and those are something that we expect and while we use such technology and also need to learn and know the technology itself. But don’t – I think it’s about the same at the time of dawn of Internet. That half of 1990, when we start the launch of Internet and now that everyone actually have your smartphone on your hand and same as when the iPhone launched. So when we look back, Internet was something people were skeptical. Some people think that we should not use such technology, something like that, things was also said by some people, too. There are many opinions about that.

Year 2000, actually, I joined SoftBank Group from the previous job in the big banks, actually, that the e-mail address has not been there on their business card. And that was very surprising to me because the banks – some banks are kind of prohibited the employees to have their own e-mail address. So that’s something that I experienced back then. And now we see a variety of the generative AI, including ChatGPT, I think that we should try and use the technology. So as a company, Masa himself or SoftBank KK, Mr. – CEO, Mr. Miyakawa, also announced yesterday at his earnings that why don’t we try? Why don’t we use so that we will be able to tell what’s good and what’s bad. And that’s something that we should share amongst our employees, amongst our people, so that we want to be the kind of a first mover to use such technology, then we believe we will be able to become the company who can lead such technologies. So that’s something that we are actually communicating to our employees.

So we will have a summit, G7 will be held next week, and there are many leaders – international leaders have their own opinions. But at the same time, we believe we need to kind of address such revolution of technology so that we will be able to contribute to people’s well-being. And that’s the kind of a company’s philosophy companies we are here for. So along with such learnings, we would like to grow the business.

So having more good understanding of new technology going from revolution. We also need to think about how we should be addressing the coming months and years. So in the coming year, that we don’t know how the volatility is going to change, volatility probably remains still high, but at the same time, we should be having a resilience against market volatility. We have to be – make ourselves in a safe position. And as long as we can take a good balance with such resilience, we should not miss any opportunities to invest in good revolution. SoftBank Group, led by Masa – as on the business model, not all the investments are successful, but we should not miss the investment opportunities and we have to have a good and solid financial policy so that we can make sure that we’re not going to miss any investment opportunities. That’s why we believe our financial policy is important.

And therefore, that we have a financial strategy for fiscal 2023. So we have no change at our financial policy, which we’ve been having. But at the same time, that we would like to have financial management adaptable to both defense and offense. Financial policy. I have no change in any word here. So same policy as I’ve been communicating to you in the past few years, maintaining LTV below 25% in normal times, maintain at least 2-year worth of bond reduction in cash. Actually, we have about 6 CIP balance of bond redemption in cash with us. And at the same time, secure recurring distributions and dividend income from Vision Fund and other subsidiaries that we have to keep good communication with our Vision Fund and also our subsidiaries to make sure that.

So we have a very important base, which is our financial policy. And based on that, we will also like to make a good balance with the offence. So resilience is going to be very important. And as long as we can keep our financial policy, then I think that we can go for the next step, which is to invest in the information revolution while maintaining financial stability. As a result, when it comes to capital allocation, which is always the very serious discussion in Board of Directors meeting, so we would like to see how the market changed, how the environment change. And the financial policy wise that those two major stakeholders, which are the shareholders and the bondholders. And also, there are other stakeholders as well.

But the first, those two major stakeholders, the one that we have to make them happy. So why are we keeping our safetiness of our balance sheet, then that we would like to make a good balance in between new investment activities and shareholders’ return. For the shareholders’ return wise, I believe we will be making quite a good numbers returned to shareholders. In the past 5 years, about JPY4.5 trillion buyback has been done. I don’t think there are many companies like us who has been bought back such a level. So that’s something that I hope you appreciate, and we will continue further discussion. And at the same time, we need a safetiness in balance sheet. We need a good – you need to see the good importance and focus on the ratings as well. So while we’re keeping the safetiness of balance sheet that we would like to think about the return to stakeholders as well as the new investment activities.

So final – finally, that I would like to give you a summary. So solid defense is in place – has been in place and also at the same time, getting ready to go on the offensive with the AI revolution on the horizon and the financial management that drives both defense and offense. In the current business is mainly from two engines, one is Vision Fund and the other is Arm. And Arm is making a very good step forward, relisting by confidentiality submitting just for F1 and the Vision Fund, of course, had a challenging years, but now that continuously focusing on increasing value of portfolio companies. So with this team is also going to be the good contribution to the Vision Fund performance as well.

Vision Fund that we shouldn’t be looking at only 1 year, 1 fiscal year. It’s the activities go on to next year and on. So I want you to see a kind of a long horizon. Japan, for example, is a very good company. So for example, PayPay is making a very good progress as well. So I hope that you can expect on us for future.

So that is all for me. Thank you very much, and we will be happy to take any questions from you.

Question-and-Answer Session

Operator

[Operator Instructions] We are starting from the floor now. If you have any questions, please raise your hand.

Unidentified Analyst

Thank you. [indiscernible] from Bloomberg. I have two questions. First, about ChatGPT. I think that you are very positive about ChatGPT and yesterday, Miyakawa-san, SBKK, mentioned that the established generative AI company in March. So as a SoftBank Group, do you have any strategy about AI, generative AI and ChatGPT? That’s the first question. Navneet or Goto-san, especially since it seems like you are teasing out a potential shift into offense mode a little bit. Would that mean a bounce back in investments starting this quarter since we’re kind of into May already? Should we expect a bounce back in investments this quarter or if not, around when?

Yoshimitsu Goto

Thank you for your question. The first question about ChatGPT and our approach to generative AI. Yes, you’re right. Miyakawa-san talked a lot about ChatGPT, generative AI, and we were worried because he might talk too much. And Samsung had stopped making presentation at financial results announcement for the last 6 months or so. What he has been doing instead is, of course, studying Arm and Arm’s business model. And as you know, Arm chip is essential to AI. So working on AI should lead to taking leadership position in AI, excuse me. So in the last few months, there have been a lot of services and products launched in the market. And from our perspective, what kind of businesses that we can create from those opportunities? Those are the things that we are currently working on, not only things that are available now with generative AI, but we have a broader vision. Like I said earlier, when Vision Fund was launched, our vision has been such that AI will redefine every industry against that background, how and what kind of companies that we should work with and how we can implement strategies as a SoftBank Group. That’s important. Yes, [indiscernible] san mentioned that he created the company, just to create company. So it’s not a big deal yet. But as approach to AI that indicates something to you. And as a parent company of SoftBank KK, which is an operating company, Mr. Son looks at this big theme and how we approach, how we are going to work on at General Shareholders’ Meeting. I hope that Mr. Son will share his view as much as possible. Nothing is confirmed the finalist yet, but we will see how it goes. Navneet, second question, please.

Navneet Govil

In terms of investment activity, as Goto-san said, during the defense mode over the last 12 months, we have been making investments, but we are very selective and deliberate about those. And as we find new investing opportunities that are attractive, we will continue to make investments.

Unidentified Analyst

So I guess not really a clear – not much clarity on how big, I guess, that investments could be.

Navneet Govil

It really depends on the opportunity. If it’s at a very attractive opportunity, we can invest considerably. So it really depends on the opportunity, is the investment opportunity leveraging artificial intelligence? Is this a good tech stack? Do they have positive unit economics? And is this a company that can scale? So depending on the investing opportunity, we would be looking to invest.

Unidentified Analyst

Thank you.

Yoshimitsu Goto

If I may add. For example, 3 years ago, we invested JPY5 trillion over 12 months or so. So back then, what we did was to make an investment as much as possible to cover broadly. But now we are facing against wind. And we have to ensure financial soundness and financial strength. So we have to be very selective in terms of investment. So we can’t charge ahead right away. We will be selective continuously.

Operator

Thank you. We would like to take our next question. So next gentlemen – to the current person who made the question.

Eriko Wada

I am Wada from Nikkei Newspaper. I have two questions, please. First one is about Alibaba. So recent – how much percent of the holdings do you have in Alibaba and of which – how much are used for the forward contract? So with the settlement with such forward contract, can we say that effectively you have used up all the shares?

Unidentified Company Representative

Effectively all the shares are being used for the such forward contract and some others. There are some details there, which is going to be a bit complicated. But overall, I would say, from the financing point of view, all the share has been utilized.

Eriko Wada

Regarding Credit Suisse that I would like to ask you. So this Greensill, which was the investee of the Vision Fund, and there are a legal lawsuit, what the claim is made by Credit Suisse? And I would like to ask you how you’re positioned about?

Unidentified Company Representative

This is very unfortunate in the Credit Suisse. We’ve been very close with them. And this time, Greensill, which was also investee of Vision Fund and from the Credit Suisse point of view, Greensill was a counterpart for the financial transactions, and I believe they had a good relationship as well. But at this end, the legal lawsuit, they are the kind of a lender and the lending business, and they are saying that the money they lent is not repaid. So asking other person to pay that back for them. That’s something that they are doing.

Because Greensill has been our investee in the – they were at the time, facing a challenging environment. So while we’re supporting them and was the hope that they can turn around and made the growth. And there are time whether we have provided additional resource in – and return that they have provided the convertible shares. And the resource was to use for the repayments and they should have been using such resource for the repayments. However, that has not been actually used for the repayment, which was not our decisions, and we have no such responsibilities for their decisions. We provided – took the risk and provided support for them to turn around.

And because that money did not come back to Credit Suisse, so that Credit Suisse is made – upset about us. And about 3 years ago, all that our legal team made a very thorough investigation and very thorough reports on that. I don’t know how long it’s going to take. So I’m very sad that this case has been raised because Credit Suisse, is one of the very close financial institutions, and I cannot understand why this kind of claim has been raised.

And we had about 20 years of relationship with the Asia Pacific region of the Credit Suisse. And because of the management of the Credit Suisse, they may have some reasons, which we have no idea, but has to make such claim. So this is baseless claim that they are making. And I don’t want to lose our reputation because of such a baseless claim so that if there is any speculations or any speculated articles, then I will be sure to clarify our positions and our understandings. There are some ways that or tactics you may be able to use by providing or not providing information, but I don’t want to lose such [indiscernible] game. So that’s something that I would like to position us about.

Operator

Next question. Goto from Mainichi.

Unidentified Analyst

In 2023, you’re going to be defensive as well as offensive. When you turn to offense, what kind of things will trigger for you to turn to offense?

Unidentified Company Representative

So it’s not like when the traffic signal turns from red, green and put axle, it’s not like that. If there are companies that we should collaborate with and if there are companies that we want to consider operating those companies, when that kind of timing will come – it’s more like how we cross the cross-road without traffic light. There is no pipeline in sight. But when an opportunity comes, we want to be positive. Last year, unless something unusual happens, we would rather pass opportunity, but this year, if we are comfortable by checking every aspect, then we want to take steps one by one. So it’s not like right away, we start investing, but it’s more like taking opportunities.

Operator

Any other questions? Gentlemen, the third row from the front, please.

Unidentified Analyst

[indiscernible] from Nikkei Quick News. I have two questions, please. So a simple question. Open AI, why you haven’t invested in this company? Was there any discussion you turned down? Or you are not looking into this company? Or what was your position about Open AI?

Yoshimitsu Goto

I hesitate to make any comments. We knew this company, but we haven’t – we don’t – we didn’t make any investment in this company. And there are many reasons why, but I don’t want to discuss that further. Do you have any comments, Navneet?

Navneet Govil

No, I agree with you, Goto-san. No comments.

Yoshimitsu Goto

In the process of the decision-making for investments, I believe that’s something that I cannot discuss.

Unidentified Analyst

My second question is about to confirm with you some facts. Silicon Valley Bank. Year 2000, you were acquired some bank in the [indiscernible] Bank and the Silicon Valley Bank was also involved, but are there any capital relationship with SoftBank Group and Silicon Valley Bank?

Unidentified Company Representative

There is no such relationship with Silicon Valley Bank. This time, I recall this – here this bank’s name and that recalls me from the old days, the first job that I – after I joined the SoftBank Group that it was a dismerger of this Nippon Credit banks. So that was something similar, a familiar name for me.

Operator

The next question, Yamaguchi from Manic Shimbun.

Unidentified Analyst

About WeWork. You recorded about JPY600 billion or so. How do you view? And currently, as a group, how much stake you have in WeWork?

Yoshimitsu Goto

Our view to investments in WeWork, you asked. We expected huge growth since investment and eventually, the last support that we provided to WeWork hoping WeWork will turnaround. But then COVID-19- took place and property market tank. So they have been struggling. And still struggling in terms of the performance, but we still expect them to turn around the business. Navneet, any comment?

Navneet Govil

So as you know, WeWork is a public company, and we are insiders, so there is limited information that we can provide. Also, WeWork’s earnings took place on May 9. So I think I would defer on the performance of WeWork to their earnings that just happened.

Yoshimitsu Goto

About percentage of stake, economic stake, they have been going through a restructuring, but about 70%.

Unidentified Analyst

They are still affiliate. Any reason why they are still affiliate. It’s not subsidiary. Can you tell us anything?

Kazuko Kimiwada

Well, yes, definitely affiliate as far as classification is concerned.

Operator

Any more questions? Any other questions, please?

Yoshimitsu Goto

Before that, let me add a little bit. As Kimiwada-san said, that’s correct. So voting right space is less than 50%. So, please continue.

Unidentified Analyst

My name is from [indiscernible] Newspaper. What kind of AI areas are you going to invest in? That’s my question. So as an investment company, of course, performance is important for you. In the – there may be many expectation on AI, but at the same time, there are many challenges as well. At the cabinet meeting democracy is important. Human rights important. So there are many discussions regarding the basic rights and the basic concepts. As SoftBank Group, other than performance, is there any criteria that you would like to set when it comes to investment in AI? If you have any, please share with us? That’s my first question. And my second question, being offensive – and also you mentioned about generative AI, but the restart of investment, does that going to start with generated AI or are you going to invest in other than generative AI as well as you turning into offense mode?

Kazuko Kimiwada

For the second question, let me answer from your second question. So, it’s not that we only invest in generative AI, but still, AI is the kind of our main focus. So, anything AI-related, and we would like to consider source. May not be too speedy, we need to be good in selections. And after then, what kind of things will be target for our investments, that’s probably too early to tell at this moment. Once we have more use in generative AI, what kind of jobs or tax may have a dramatical change. And our – actually SoftBank Group is also known as a lifestyle company. So, that’s something that we are very keen to focus. How can we change people’s lifestyle. So, that’s same as when we started our business and there were not any wholesale – software wholesale business around the market, and we wanted to kind of create it so that the people are living easier. And then we saw Internet, broadbands, iPhones, smartphones. So, those are kind of key words and how we are going to target is something that you can imagine. And once the time – right time comes, then even my boss will be telling you.

Operator

Thank you very much. Any other question from the floor?

Unidentified Analyst

Miyajima from Factor. Mr. Son has an insight in technology and wait until opportunity comes and wins eventually. And how excited Mr. Son is at the moment about AI? Goto-san, in your presentation, you mentioned a lot of things about AI. But if Mr. Son was here, what would he say about AI? I am sure there are still risks. You mentioned that Mr. Son might share his view at AGM, but excitement that Mr. Son has, can you share with us?

Yoshimitsu Goto

Well, if I talk too much, Masa might give me hard time. But excitement, I think is tremendous excitement he has. In the last six months alone – six months ago, generative AI, I don’t think many people heard about generative AI and new generative AI. But still, he had too many things to start around AI. And he was like – he was excited as much as when he launched the company. And sometimes I am worried if he has time to sleep because rapid growth and development of generative AI and AI itself. I think I can’t explain clearly how excited he is, but I have spent time with him every day, and I try not to be overwhelmed by him too much.

Operator

Next question, pink shirt, gentlemen, please.

Unidentified Analyst

[Indiscernible] Mainichi Newspaper. Regarding WeWork, I have one question. And also one question about Alibaba. So, I will start with WeWork. In the financial report in Page 7, JPY600 million additional loss has been recorded. And I believe there are some losses in the past. And cumulatively, how much loss has been made? That’s one question. And after April, I believe that the convertible bonds exchange has been made after April, there are new kind of development there. And how that is impacting to the first quarter for your consolidated results?

Yoshimitsu Goto

As for investments, I would say about JPY11 billion, of which remaining is JPY400 million, and other than that, some loss on guarantee. Majority of them are on the fourth quarter of fiscal ‘22, and that’s been already recorded in the fourth quarter of fiscal ‘22.

Unidentified Analyst

So, total loss, cumulative loss, how much was that?

Yoshimitsu Goto

JPY1.7 trillion is investment and some bad debts, maybe I should get the correct information and come back to you.

Unidentified Analyst

And I have question of Alibaba to Goto san. In the past 20 some years, Alibaba’s shares has been very important for you and now, you have been money tightening all of them and you mentioned already in our 20 years because of Alibaba shares that you have been able to convert your business to the investment company, can you give us any summary of the past 20 years?

Yoshimitsu Goto

So, these numbers are the performance of the investments, which I think this historical number that we rarely see and they brought us a tremendous contribution, and they were a great friend of ours and Jack has been serving as our Board Director for quite a long time as well and a great friend for Masa as well. And at the same time, while there are some challenges in Chinese market, they became a good bridge for us so that we were able to learn and experience a lot in Chinese market, too. Alibaba themselves, in the very beginning of the business, they were just exploring what kind of business model they should be establishing. And actually, we were working along with them and because in a great and huge market in China, what happened if we do this and do that and they set up the hypothesis and executed by Jack Ma. That’s why I believe they became such a great success in the huge – became a huge group. And we were able to spend the same time with them, which was a tremendous experience for us. I have been there at the headquarter of Alibaba for over 20 times or so. And we have so much appreciation for them. And this is not the end of the story of our relationship. Actually, Jack, Alibaba Group, we believe that we would like to be in a good relationship with them, too.

Operator

In the interest of time, this will be the last question from the floor. Now, I would like to take questions from Zoom participants. [Operator Instructions] First, Inagaki from Financial Times.

Kana Inagaki

Inagaki from Financial Times. Thank you for taking my questions. To Goto-san, in the presentation, you mentioned a lot about geopolitical risks. You stressed geopolitical risks. And you also mentioned that there is no solution. That’s why you are very concerned about geopolitical risks. Without solution against those risks, how are you going to address them? Of course, your graphical diversification is what you are doing, but as risks can get bigger, how are you going to address the risks? And where, from your perspective, those risks might be presented? Thank you.

Yoshimitsu Goto

Global supply chains have been disrupted by Russian’s invasion into Ukraine. Business person like us was surprised because we have built the supply chain based upon – we believe that people are born good, not born evil. Although we believe that the human kind can find a solution to address such risks, but we have done a lot of sensitive studies on our assets or if our assets went down by 50%, which by the way, we are still safe, even though asset value went down by 50%. So, what we are doing is to make sure that we are ready for any risks. That could happen. And we quantify risks and use that information as judgment is very important. Of course, China is something that we are concerned about from a geopolitical perspective, but Russian-Ukraine issue is the biggest.

Operator

Thank you. And next question is Mr. Nagoshi from NHK. Please un-mute and start your question.

Unidentified Analyst

Yes, this is Nagoshi speaking. Can you hear me okay?

Yoshimitsu Goto

Yes.

Unidentified Analyst

Thank you very much for taking my questions. So, there are some speculations or articles regarding Fortress sales. What is your approach on your Fortress? And another question is about, yes there is Miyakawa-san’s presentation. So, also that you would like to create GPT – new company. And SoftBank Group is also involved in this discussion. So, what is the process for your creation of Japanese version of the GPT?

Yoshimitsu Goto

So, Fortress, I have no comments on that. I don’t think we can make any comments about that. And for yesterday’s Miyakawa’s presentation, and there are many comments and remarks. And I hope that you kind of understand from what he said because this is just a couple of months movements creating companies or either in Japan or there are lots of discussion going on in the many movements are done, but that’s not only by SoftBank Corp, KK itself, but also Masa himself is involved in the discussion, too. So, the discussion just begins.

Unidentified Analyst

And coming back to WeWork, cumulative loss amount?

Yoshimitsu Goto

JPY11.5 billion and the JPY0.9 billion provision, so JPY12.4 billion in total. That is all. Thank you.

Unidentified Analyst

Nago san speaking, so what is your ultimate goal? Do you have any specific ideas or views for the goal?

Yoshimitsu Goto

I want you to have a good expectation on us. And let us work on that. Thank you.

Operator

Thank you very much. We – for the interest of time, this was the last question. So, thank you very much. This concludes the SoftBank Group Corp. earnings results briefing for the fiscal year ended March 31, 2023.