SoftBank set for sharp quarterly profit drop amid pressure from Elliott

SoftBank has come under increasing pressure for its lack of transparency, especially around its $100 billion Vision Fund of largely unlisted start-ups.

Japan's SoftBank Group is expected to post a slide in profits for the past quarter, deepening concern about its ability to secure funding for a second Vision Fund and giving activist fund Elliott Management more fodder for a shake-up.

Elliott, the New York-based fund founded by billionaire Paul Singer, has amassed a stake of almost $3 billion in SoftBank and is pushing for changes including $20 billion in stock buybacks, sources said last week.

The emergence of Elliott, one of the world's most powerful activist investors, as a prominent SoftBank shareholder is likely to highlight the Japanese conglomerate's difficulties following its soured bet on office-sharing startup WeWork.

SoftBank, which reported its first quarterly loss in 14 years in July-September, has come under increasing pressure for its lack of transparency, especially around its $100 billion Vision Fund of largely unlisted start-ups.

"I'm not sure investors will have confidence in the private valuations that drive the reported performance of the Vision Fund, particularly after the performance of WeWork and others," said Morningstar analyst Dan Baker.

The tech conglomerate, which reports on Wednesday, is expected to post a 20% fall in operating profit to 345 billion yen ($3.1 billion) in the October-December quarter, according to the average forecast of three analyst estimates compiled by Refinitiv.

That would follow a quarterly operating loss of 704 billion yen when the firm was whiplashed by an $8.9 billion hit at the Vision Fund as the value of WeWork and other bets like Uber plunged. The loss prompted founder Masayoshi Son to acknowledge his "investment judgement was poor in many ways".

A second quarter of dismal results would only reinforce doubts about the viability of a second, massive fund, given that it would be reliant on profits from the current Vision Fund for some of its funding.