SFTBY - SoftBank Group Corp. (SFTBY) Q3 2023 Earnings Call Transcript
SoftBank Group Corp. (SFTBY)
Q3 2023 Earnings Conference Call
February 07, 2023, 02:30 AM ET
Company Participants
Yoshimitsu Goto - Board Director and CFO
Kazuko Kimiwada - SVP, Head of Accounting Unit
Navneet Govil - CFO, Member of the Executive Committee, SB Global Advisors.
Conference Call Participants
Eriko Wada - Nikkei Asia
Takahiko Hyuga - Bloomberg
Presentation
Operator
Thank you very much for waiting everyone. Now we would like to start SoftBank Group Corp. Earnings Results briefing for the Nine-Month period ended December 31, 2022.
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 the Executive Committee, SB Global Advisors. He's joining remotely due to unavoidable reasons. Thank you for your understanding. Ian Thornton, Investor Relations, Vice President. 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
This is Goto speaking. Thank you very much for your time today. Good afternoon.
Since last quarter, we have changed the approach for these earnings from Masa to myself. I'm not -- I'm still working on making better presentations. Hopefully that I will be able to make it a good presentation for you. And the first that I would like to start covering from most important indicators for SBG.
I would also talk about the environment and market later on. But as you know, the indicators are somehow instable especially looking at the equity market, January to March, April to June last year was very instable, after then, we see some improvement signs, but still we cannot be optimistic at this moment yet.
As a result, we've been seeing a lot of fluctuation in interest rates, key rates been moving around in many markets, but at the same -- but I believe it's important for us to show you the robust balance sheet.
And as an investment company, of course, one of the most important engine for the business overall is Vision Fund. And I would also like to share with you the current status of Vision Fund. But including all those factors, I would like to first of all show you the robustness and healthiness of our balance sheet, net asset value. So this is about JPY 13.9 trillion and the loan to value to check the safetiness of the debt, which is 18.2%. So this is to calculate loan against how much we have as an asset.
And for the short-term period, cash position is one of the important indicator to check our healthiness. And this was JPY 3.8 trillion. So these three indicators are well managed in safe level. And being in this position, we believe as an investment company, as long as we're being conservative in terms of new investment activities and so on, we believe that we will be able to maintain this healthy -- organization's healthy business. Compared to the end of September, net asset value has decreased a bit.
September end was JPY 16.7 trillion, in the December quarter JPY 13.9 trillion. But we did have a foreign exchange impact, which was not small, JPY 1.5 trillion equivalent was about an impact to net asset value, so that not directly from the fundamentals from the portfolio companies or investees.
Foreign exchange, September end was JPY 144 per dollar and December end was JPY 132 per dollar. So this was quite volatile and that made an impact to our assets as well as P&L. Loan to value 18.2% at the third quarter.
So from the 15% of second quarter, we had increased by three percentage points. And for your information, this 25% itself is already safe number, and we do have a very low -- maintained low compared to 25%. Therefore, that even we have a slight increase compared to last quarter in teens level that we believe we are very much safe enough. So number-wise, it looks a bit increased. However, as you can see on Page 8, this has some foreign exchange impact.
So if we exclude foreign exchange impact, it was 16.2%. So foreign exchange impact was about two percentage points. Cash position, end of September, JPY 4.3 trillion, JPY 3.8 trillion for December end, slight decrease and some are used for the debt repayments; therefore, that we don't think any changes in our healthiness. And also this had some impact from foreign exchange, about JPY 200 billion or so was due to the foreign exchange impact. Based on this KPI, our status, we are very much solid defense mode.
No change, no issues here at all. And we have a very ample cash position in what is this for you may ask. This is whenever we would like to switch our mode to offense, we would be able to play for that, and we would like to be prepared for the time to come.
And as of today, safetiness is as you saw, but for the Vision Fund, in over past one year or so, environment was very tough and very severe management has been executed. So with the tightened management and based on that, we would like to see how the market and environments will go and change.
When do we start playing offense, which is a quite difficult question, but I want you to also see the market situation. This is equity market, so we have September end and the December end or the quarter end. But from December end to as of today, to-date basis on your far right on the chart, this is actually showing some increasing trend since December end.
One example is S&P 500, NASDAQ, and also Golden Dragon China, this is -- which is the Chinese companies in NASDAQ and each, actually, that we also picked up the examples of our public securities that held by Vision Fund 1, Vision Fund 2 and SBG itself. And these are the major investee of each parties.
And you see it has some characteristics, but trend voice in the past one year or two years, it has hit the bottom and actually showing the sign of increasing something that I believe we can summarize as a kind of a 1-year history. From now, what's happening after this, we believe that there will be three scenarios that we can think of, and we are actually prepared for each of these three scenarios for our financial strategies or for the time to switch our mode from defense to offense.
So scenario one is the optimistic scenario, which is the linear early recovery. Scenario 2, instability followed by recovery from second half this year, which is based on the view by analyst, market, I believe that the majority of the people are actually looking into this scenario 2. And the scenario three is a further decline followed by recovery after 2024.
So in each scenario, actually, we are fully prepared for that because that the investment -- as an investment company, we need to face those reality. In that case, do we want to -- and we do want to being very robust in terms of balance sheet so that we'll be able to be prepared for any risk case scenario.
So optimistic case, pessimistic case or the base case, that as an investment company, we believe it is very even more important for us to keep the defense mode. I believe we can change our mode to offense mode any time. As you saw that we have a very ample cash position so that we can change our mode anytime if we wish to, which means we don't have to rush.
We don't want to waste money either. And this is the market view. Private equity is the main direction for the Vision Fund investments, and we've been seeing the factors that we need to focus, which includes inflation trends, key interest rate, possible recessions, and in addition, we also need to focus and pay attention to this tension situations caused by these geopolitical risks and situations.
So we do need to kind of make an outlook based on those movements. For the equity market recovery, there are many voices said that second half of this year is something that we may be seeing recovery.
But also, we need to pay attention to the pessimistic scenario of further decline. And the majority of our investees are the private companies, therefore, can they do the financing under such circumstance? And also, can they look for IPO event in the course of their process. So those are the things that we need to pay attention to. As a group overall, including Vision Fund, this is the investment strategy as a group as a whole.
No change at all. We will be -- being there as a vision capitalist for the information revolution. And also our fund is managed by the long term. We want to be the biggest player in the information revolution. Well, once again, we are in the defense mode, so that we are financially prepared for all the scenarios.
And for Vision Fund case, they have about 500 and some investees, which requires the good monitoring and good support. And from the SoftBank Group's point of view, we have adrift investment in Arm, which is we're very much focused. And other than that, we have SoftBank Corp. Mobile Operators and also the holdings, which we recently announced the mergers amongst the Yahoo Corporation and LINE Corporation. So as a shareholder of those companies that we do need to be prepared and being ready for any scenarios to come.
Now I have talked about the current snapshot. And let me move on to consolidated results, which it's shown on Page 19. This is a result from the first quarter through third quarter of FY 2022. Net sales JPY 4.8 trillion, loss on investment JPY 1 trillion, income before income tax JPY minus 290 billion, net loss JPY minus 912 billion. We are still against wind and these are consolidated numbers, and we have some specific characteristics when it comes to gain or loss on investment.
That financial result announcement, we explained a little bit about Alibaba's transaction. We did early settlement of Alibaba, and we had about JPY 3.7 trillion. And that was a big gain in the last nine months. However, looking at loss from Q1 through Q3, we are looking at JPY 5 trillion loss from the SoftBank Vision Fund. So those has increased.
So in that, we are looking at loss on investment by JPY 1.3 trillion, and again, this is loss on investment. Another number I'd like to mention here is income before income tax by the segment.
SoftBank Vision Fund income before income tax was a negative JPY 4 trillion, difference between loss on investment and income before income tax is because LPs holding was deducted or not. When it comes to loss on investment, Alibaba's gain was included, SoftBank, Arm, all in good, especially Arm. We are looking at consecutive positive numbers, which I'll come back to later in my presentation.
Net income by the quarterly is shown on this slide. On the far right, JPY minus 783 billion. This is third quarter number, but in the second quarter, because of the gain from Alibaba transaction, we are looking at a positive JPY 3 trillion. This was one time. And if we didn't have that Alibaba transaction, we would have seen negative numbers in the second quarter.
But we are also looking at the trend of improvement of net loss by quarter by quarter. And the next slide shows impact of ForEx. In terms of net asset value, weaker yen has a positive impact. Why? Because most of our assets are held in foreign denominated currency.
So for example, if yen gets weaker against dollar, assets in dollar term is improved. However, in recent months, yen is getting a little bit stronger. That's why this number compared to the September number is a little bit smaller. And in terms of consolidated net income, ForEx impact is negative. However, again, since yen is getting stronger a little bit, the impact was little bit milder compared to first half of this fiscal year.
When it comes to monetization, we will see real value, of course, foreign exchange goes up or down, but we are not exercising extreme hedging. But again, most of our payment is in dollar terms and asset -- most of the assets, like I said earlier, are held in dollar currency. And like I said earlier, we have ample cash position. So we have a good balance of assets held in yen and assets held in foreign currencies. Next slide shows net asset value, the trend since 1999.
In the last 12 months, the trend is downward due to market conditions. But still, we have a net asset value as much as JPY 14 trillion. In history of SoftBank, we believe this NAV is good enough. And from September through December, net asset value decreased from JPY 19.7 trillion to JPY 16.9 trillion and if you go deeper, impact from ForEx is JPY 1.5 trillion. Also share price had impact by about JPY 0.0 trillion.
And share repurchases impact about JPY 0.5 trillion and also we paid tax. Therefore, NAV as of December 31 is JPY 14 trillion. And net asset value per share and share price is shown here. And also, you can see discount against actual market price, which I'm sure investors are interested. As of September end, discount was about 55% and stock price was less than JPY 5,000.
As of December end, discount was 40%, so 15% improvement, it looks like. And stock price went up, which is good. But fact of the matter is, assets went down. So even though discount was improved, we can't be 100% happy about this. We need to make sure that our investees will gain values, improve values while we can improve our discount.
By the way, our stock prices have been performing well. As of February 3, the price was JPY 6,328. Now equity value of holdings as of December end, it was JPY 16.9 trillion. One year ago, if you look at the far right bar -- excuse me, far left bar, Alibaba's portion decreased from Q3 FY '21 to Q3 FY 2022 of equity value holding Alibaba accounts for 12%. And in fact, SoftBank KK accounts for 13%, which is bigger than Alibaba.
And SoftBank Vision Fund accounts for 43% and Arm, which is a private company accounts for 16%, which is a good presence here in terms of equity value of holdings. And how should we look at decrease of equity value of holdings at the beginning of April or end of March last year, if you compare to the end of March last year, the equity value of holdings was 23% and now 16.9%. Was that a significant decrease, while not necessarily so because JPY 3.2 trillion was for monetization. So that's one driver of the decrease. So it's not a simple decrease from JPY 23 trillion to JPY 16 trillion.
In reality, it would have been from JPY 23 trillion to JPY 20 trillion. And JPY 3 trillion is for monetization or exchange to cash, which is stronger. So it could be said we had JPY 3.3 trillion of improvement in terms of equity value of holdings. So if you look at the diversified portfolio in pie chart, like I said earlier, a big increase came from Alibaba -- big decrease came from Alibaba. And Vision Fund 43%.
You may say that this still has a big portion of the pie chart and 43% consists of about 500 companies in the portfolio. Diversification of the portfolio is very important from a value perspective and safetiness perspective, from credit perspective and a value perspective, from the April 1 through December 31, we have been further diversified our portfolio.
But from the rating perspective portion of public shares, if you look at the right top corner, as of March 31, 2022, percent of these shares was 52%. And as of December 31, it went down to 44%, but when Arm is listed again, that percentage would go even further. I feel more comfortable about our safetiness and the stabilities of the business.
Now let me touch upon SoftBank Vision Fund. This slide, which is Page 32 is gain or loss on investment since the inception of SoftBank Vision Fund. Unfortunately, however, in the latest second quarter, we are looking at increased loss. But this fund's longevity is long and we need to make sure that we will do our best to increase the value of the funds even further. And the next slide shows gain or loss investments on quarterly basis.
In the latest quarter, which is the third quarter of 2022, we are looking at minus JPY 5.1 billion. So loss continues. But as far as the graph goes, the fourth quarter of last year and the first quarter of this year were most challenging, but it's been improving since then. So we are on the improvement trend. This trend is in line of the trend of the equity market.
We try to value our assets as conservative as possible, especially when it comes to private companies, evaluating private company is very important and also difficult. So we are looking at third parties' views and also we combined with other indexes. And every quarter, we mark those investments. Again, our investments longevity is long, and we will do new investments. And also, we will increase the value of the portfolio so that we can make the funds assessed as core business of our group.
As you know, we have SoftBank Vision Fund 1 and SoftBank Vision Fund 2. Now this slide shows SoftBank Vision Fund 1's cumulative investment return. Investment cost $89.6 billion and cumulative investment return as of December 31 was $100 billion. As you can see, exited a portion increased and private companies currently held, we have high expectations from those private companies, and the public companies currently held not exited yet. Currently return is getting smaller.
So cost is bigger than the return for public companies currently held. That's a challenge for us. And Vision Fund 2's cumulative investment return is shown here. It's a relatively new fund, and they have been looking at very challenging market condition since the inception, investment cost is $49 billion and cumulative investment to turn $33 billion. That's a very conservative view of ours.
Part of the investments were exited and this portfolio -- the management team is working on improving the value of the portfolio. Again, SoftBank Vision Fund 2 is relatively new. And again, we need to make sure that Vision Fund 2 will do their best to increase the value of the portfolio.
And from a different angle of the underperformance of the fund business, if you look at this pie chart on the left-hand side, it shows as of March 31, 2022, 450 companies consisted of the portfolio and whether the value was gained or lost. At that point, 169 companies lost values, whereas 163 companies gained value.
But again, since then, market condition has been very, very challenging. And although the company invested increased to 472. Of that, 344 lost their values. And even though the condition -- market condition was very tough, 100 companies gained value, so some companies were doing good, but most of the companies, however, are struggling. And that shows the overall trend globally.
I believe that other similar funds like us are against the tough wind, but we as a venture capital are committed to supporting emerging businesses going forward. And this slide shows gain or loss on investments and factors behind gain or loss. If you look at markdown cases, 38 companies, public portfolio companies, $16.6 million marked down. And performance of the portfolio company was another reason why 138 companies are marked down by $12 million. That's something specific in the quarter.
So not only the market but also economic environment and supply chain disruptions, there are some risks and challenges that those portfolio companies are struggling against. Investment amounts are shown here, we remain focused on defense.
In fact, in the last quarter, we invested only about $0.3 billion compared to the last year, as you can see, we limit investment to 1/10th. This slide shows stock offerings and sales and monetization. We don't have many number of stock offerings, only four companies and sales or monetization we did by $6.5 billion, but we are not desperate in terms of monetization.
We are looking at potential of the portfolio companies and also balance of the holdings, we will make sure that we have a most appropriate policy for monetization or sales in the future. We don't want to pick fees that have huge potentials in the future. So I understand there are some concerns from investors or the market for SoftBank Vision Funds and I pick up some examples here. What's the policy? And our portfolio companies' cash runways all right?
Are we adding value to portfolio companies or how are we operating and also any IPO plans, I believe these are the kind of common concerns or questions that you may have. And starting from the policy, this is almost similar with the SoftBank Group's investment policy and the AI revolution is actually the base for the establishing this fund so that no change in belief in AI revolution.
And also, at this moment, focus on defense in the current situation, therefore, that via heightened disciplines for new investments and also enhancing the value of current portfolios. And based on the needs from portfolios, we are also supporting a variety of the actions and events, expansion of business or entering into new markets through the M&A and through the partnership of opening new channels and accelerating innovations. Also, efficiency improvement is one of the biggest agenda so that driving OpEx reductions and so on.
So those are the support and sometimes recommend for the concerned parties. Cash run rate of portfolio companies. When you look at Vision Fund 1, 99% of the companies does have a cash runway of over 12 months. When it comes to Vision Fund 2 compared to Vision Fund 1, of course, because small new companies, new investments than Vision Fund 1, so it's not 99%, but about 90% of the companies are securing 12 months or above more cash runways. LatAm fund is a little bit lower than that, close to 80%.
So it's the same -- looks the same circle in the three respective funds. But actually, the size of each fund is different so that it cannot be apple-to-apple comparison, but this is the current situations for the cash runway for each respective fund. So for Vision Fund 1 and 2, roughly speaking, that I will say that those portfolios are very stable in terms of cash management.
For the fund level initiatives, we are very much paying attention to diversification of portfolio and very much disciplined monetization. So we are not desperate to monetize everything, but actually that we would like to have a very much disciplined way of monetization.
And in addition to that distributions another initiative that we're working on. One of the biggest characteristic of the Vision Fund is that ticket size is large. One ticket size is larger than the others. So taking advantage of such characteristic, we are -- we can invest in late stage or sometimes unicorns, and we can actually make many investments in such companies or such businesses. And that's one of the benefits that we have to operate in such a huge fund.
So these companies of the $37 billion or above investment in late stage is something that we can say that in a better position for future IPO. So once the environment in the markets becoming clearer than that I believe that we can have a good expectations for the future.
So one of the driver or the engine for the SoftBank Group is Vision Fund and the other engine is Arm, and let me summarize or let me also explain about the current status and also the semiconductor industry. In the past 20 years or 30 years, semiconductor industry sale has changed a lot. We have heard media reports about Japan's semiconductor industry and its weakened market positions.
In the 20th century, the global semiconductor market was dominated by Japan, U.S. or European countries. However, in the 21st century, we have seen the rise of Taiwan or the South Korea. And recently, we've been witnessing U.S.-China trade frictions and so on. Japan is to account for, nearly, I would say, 50% of the global market, about 30 years ago, 40 years ago, however, now it's estimated to be around or below 10%.
At the time that Japan used to -- Japan had a share of 50%, the role of semiconductors was different those days that the electric appliances are the kind of main user. And they were actually integrated model that where all the processes starting from design through manufacturing are completed in one group of company, so that's why that we were able to have about 50% of the share of the global market, and that's been changing in 21st century.
This aggregated approach become more popular where design and manufacturing are separated. In the design stage, fabless firms focus on chip design and development using open architecture like Arm where the foundry firms focus on manufacturing. They are also not having any plans but actually they are designing the chip and asking OEMs to manufacture.
So we are in a very much chained to this aggregated approach and that chain itself is actually even boosting the value of Arm in the market and making Arm stronger in the market. So the value chain of semiconductor, as you can see semiconductor IP to start with. And then on to chip design, manufacture, OEM product and software and applications. So with those process, semiconductor product is available for you so that you can enjoy using their service. Computer chips are now so complex that the semiconductor industry has disaggregated into specialists.
And these specialist companies provide building blocks or tools such as CPU, GPU, memory controller and display interface, and these building blocks are used by public chip design companies to design the semiconductor. And this design step is accelerated by using the prebuilt components from the IP specialist.
In these foundries, design companies will subcontract the manufacturing to a foundry, and due to the huge cost of building a fab where chips are made, few design companies can't afford to do this themselves. Only few companies can afford that by themselves. And once the chip is made, it becomes part of the materials going into an OEM product, such as smartphone or car.
So as you can see on this Page 49, Arm is kind of a starting point of relay and then bringing on to chip design, manufacturer, OEM product to software and applications, and then you will be able to see the one completed product for you. Arm-based products indeed everywhere, I believe that almost everything with electricity is using these products and 250 billion -- excuse me, 250 billion chips has been shipped.
And this is a graph to show the shipments that's been made, and immediately after we invested in Arm that you may recall one slide that we show at the earnings results announcement, which is something that made me feel something, and this is just to remind you that this was a slide that being used back then. This was a year -- one year after the Arm acquisition. So 2017 March, that actually, these are the forecast numbers. So we are expecting that 200 billion shipments is expected for 2021. And actually, March 2021 already, we have exceeded 200 billion.
And at the end of December 2021, 230 billion. So actually, we have overachieved what we have forecasted back then one year after the acquisition of Arm. And now that we are achieving 250 billion Arm-based chip shipped. So the number of such shipments is actually even more growing, and we're expecting to expand the business. 8 billion. What's this number? Arm-based chips shipped from July to September 2022, this is the record number. And 1/3, what's this? Of all chips where processors are Arm-based.
So Arm market share is this big and 70% of the world's population uses Arm technology every day. I think it's in sync with the penetration of mobile phones and Arm technology helps them to work in a good performance. Arm is gaining market share as the shipment number grows in four spaces, for example, mobile, market share grew from 90% in 2016 to 95% in 2021; IoT from 30% to 63%; automotive from 10% to 24%; and cloud 0% to 5%. In fact, in mobile space, close to 100%. And it can't be exceeding 100%, but Arm can go into adjacent areas from this mobile space.
And when it comes to IoT, since Arm has most advanced technology, Arm was not really adopted at an early stage of Internet of Things, but it's been changing. High-performing chips are needed in IoT market and accordingly, Arm's market share grew from 30% to 63% in the space of automotive as automobiles have more functions and high-performing chips inside automobiles are needed more and more.
And in the space of cloud, initially, the share was 0%. But we're working with Amazon, Google and Microsoft, those big cloud players, which have adopted Arm's chip technology. So accordingly, Arm has grown market share from 0% to 5%.
Consumers want new technologies and new products in order to meet consumers' expectations, manufacturers need to deliver high-end products continuously. That's due to smartphones. In fact, one smartphone has 50 semiconductors for device and game console, 100 semiconductors per console. And when it comes to high-end automotive maybe Lexus, for example, or Porsche and Tesla, very different cars than traditional cars, those high-end automobile has 10,000 semiconductors per car. And in those spaces, Arm has great opportunities.
And Arm is looking at growth of revenue CAGA is 19% and adjusted EBITDA even further growing in the latest nine months, it grew by 71%. Size of semiconductor industry is going to be bigger and bigger for long term and very short-term silicon cycle, in the long run, sometimes you may see ups and downs, but I don't think that currently used chips will go down. And as products get higher end and have more functionalities and more Arm as semiconductors will be used in those devices and Arm strength can meet our strong expectations.
And the future of Arm is tremendous. Arm's strategy is not to sit and wait for the market to grow, in fact, Arm's strategy has four pillars to maintain or gain share in long-term growth markets because they've got almost 100% share of smartphone. They want to keep the share. And also, they want to develop more advanced IP delivering a greater value while maintaining a strong hold.
Arm wants to invest in emerging technology areas and make sure that they have appropriate price point by gaining market share in CPU and by increasing GPU market, then loyalty per piece should go up. And loyalty, they need to make sure that their loyalty is a most appropriate level for them. And in the long-term, they want to create a sustainable business fit for the future not only developing things that can sell now.
But they want to also focus on developing technologies that can grow in 10 years or even further down the road. In fact what's, happening is efforts paid off by the people that they took in some time ago. We announced the plan of Arm IPO, and we are planning to have Arm's IPO sometime in 2023. And the preparation is underway, and we will see how the market condition goes. Last but not least, no change in financial strategy. I don't go in too much detail as it has not changed.
But while we're keeping our financial policy, we will look into and explore the investment opportunity. So it's not that we're going to be prioritizing investments to financial policy. I've been talking about this financial policy for, I would say, 14 years, even one quarter that we missed these words and maintain loan to value below 25% in normal times, maintain at least 2-year worth of bond redemption and secure recurring distributions and dividend income.
And monetizations in the capital allocation, so when you see the waterfall of this, at the end of fiscal year, March 2022, we had cash position of JPY 2.7 trillion and with the monetization, we had an increase of JPY 4.3 trillion and we used only JPY 0.4 trillion for the Vision Fund investment and JPY 2.7 trillion are used for the debt repayments to improve our balance sheet. So the credit investors, for the loan investors that we wanted to return. Share repurchase, of course, is a return to shareholders.
So we always are keeping these three factors in mind. So money, once it's available, of course, at the investments by Vision Fund is something that we wanted to use. So new investment, return to shareholders and the debt repayments, we always like to keep the good balancing between those 3 while keeping those we have JPY 3.8 trillion including undrawn commitment lines for the cash position for the December end.
Cash position, JPY 3.8 trillion. Again, this is fully covered 2-year equivalent of the bond redemptions and buyback. Since last year, we had repurchased total JPY 1.4 trillion. You may –or the investors may wonder, do we have any other programs to announce. But actually, we have already done JPY 1.4 trillion. But buyback or the share repurchase is always the very important agenda for the Board of Directors meeting, we always keep discussing about it and the capital allocation, always explore the best balance of those three factors.
Last but not least, SoftBank Group's vision what we need to do, we have no change in principle, always being a vision capitalist for the information revolution. We would like to be the player to lead IoT, AI, and for - as an engine for the SoftBank Group overall, we have - we are looking at the company as a net asset value based on the assets, but we say that the Vision Fund and Arm ecosystem, those are the two major engine for the company.
Vision Fund once that went through the restructuring and now that, with those members that we are working on further good management in the Arm we are having a very steady and good performance and Masa, who is not here today, but he has been very excited about the future of Arm and the chip future. So that the deepness of the market or the size of the transactions, those can be something that we are very much expecting and we are very much sure that this business or this technology is going to make a big change to our lifestyle or the working style.
So based on such huge -- such a huge assumption in the hypothesis that we would like to go on for and explore for the further steps of the business. So Masa is very much working hard on that, too. And I believe such steps for the growth is something that we always need to keep in mind for the future and the development and growth of SoftBank Group.
So of course, we need to keep in good defense mode, but at the same time, we want to keep a good focus on something that we should be focusing on, including those drivers. And that's been done mainly led by Masa. And we believe that once that the time comes, we would like to make a good - another shift for playing offense. That's all for me. Thank you very much.
Question-and-Answer Session
Operator
[Operator Instructions]
Eriko Wada
Wada from Nikkei, I have two questions. First, maybe a very small thing and when it comes to new investment of the Vision Fund, from October to December, JPY 0.3 billion, is it only one company or not? That's the first question. Second question, as interest rates are going up. When it comes to repayment or when the bonds are redeemed, are you going to borrow again or how do you see increasing interest rates? Thank you very much.
Yoshimitsu Goto
The number of company invested by SVF in the third quarter, Navneet, can you answer that question, please?
Navneet Govil
Yes, sure. It's not one company. It's more than one company that we invest in. It's a couple of companies.
Eriko Wada
Couple of, right, two companies?
Navneet Govil
I think it's more than two. It's a handful of companies.
Yoshimitsu Goto
The second question about increase in interest rate of course, we are looking at the trend in Japan and Governor of Bank of Japan. Next Governor of Bank of Japan, his view has a strong impact. In terms of cost of our bonds, in terms of Japanese bond, maybe 1% increase can be possible, but our target financing cost should have no risk for foreseeable future the impact of increasing interest on our financing cost?
Well, 80% is fixed rate. So we don't see any impact from the increased interest rate. And for variable rate, not only debt, but also we have deposits. In terms of dollar-denominated financing cost is huge, but also return on the deposit -- interest on the deposit is also big. So for Japanese part, even though risk is materialized by increased rate of interest maybe JPY 6 billion to JPY 7 billion impact. But from our total volume perspective, you can be reassured.
Operator
Thank you any other questions, please? The second row from the right, from the front, black shirt gentlemen, please.
Unidentified Analyst
My name is Nakaga from Newpek. I have two questions. First, Vision Fund I understand there were restructuring in Vision Fund, which was also mentioned in last quarter. How much reduction has been made in terms of headcount, and also, you said that they are monitoring and supporting the existing portfolio?
But with this reduced organization, can you still maintain the operation for the supporting portfolio. My second question, the buyback has been done. And I believe that the Masa's ownership stake in SoftBank Group has exceeded 1/3. How do you feel about that? And there are some discussion about the management buyouts and so on speculations. What is your view on that?
Yoshimitsu Goto
Thank you for your questions. For the first question, for the Vision Fund, Navneet, can you please also answer that?
Navneet Govil
So the reduction in headcount was previously reported to be greater than 30%. In terms of our portfolio of companies, we are very well resourced with over 300 professionals to support our portfolio companies. So we feel we are rightsized in the current environment.
Yoshimitsu Goto
Yes, thank you and for your next questions regarding Masa's ownership. This is only because of -- as a result of buyback, JPY 1.4 trillion, which was quite a huge size of the buyback has been executed and this was also in view of return to shareholders. As a result, increased the stake by Masa, but we are not intending to do so anything so that we don't have any specific comments on that.
But I would say, he is also the stable investor. He is stable shareholders as well. So for the company's point of view, having stable shareholders, increasing the ownership stake is actually good for the company. It's not like 10 -- teens of the percent point or so. So that's nothing much for that. And for the management buyout, I have no comments on that. Thank you.
Operator
Are there any other questions from the floor?
Takahiko Hyuga
Hyuga from Bloomberg, thank you very much for taking my questions. Two questions actually, first, about accounting and second - excuse me, press release of earnings calls and the second is Vision Fund. First, I think press conference is done by Goto San alone for the first time. And as you can see, we are only a few journalists here on the venue and investors may want to hear directly from Masa San, so what's your view, your press conference like this without Masa's presence.
Can I continue my question, the second question is about SoftBank Vision Fund. Analyst estimate was loss JPY 100 billion to maybe JPY 50 billion. That was most analyst estimate. But now we are looking at a number of few bigger. Is that something that you anticipated or loss was bigger than you anticipated from SoftBank Group's perspective? In the full year, if you lose for the full year, then you will have two consecutive years of loss. What's your view, Goto San?
Yoshimitsu Goto
Thank you very much. First, about the press conference of financial results, and Masa is not present anymore and if we have fewer journalist than before? Maybe that's my fault. But I don't know, we have fewer empty seats - excuse me, we have empty seats, but we have arranged more number of seats on the floor.
So I wonder if reporters on the floor were fewer than before. I'm not sure. But if that's true, maybe that's my fault. It's of course, good for Masa to be here to talk directly to you about management strategy, that opportunity should be good for people like you. In the past rather than talking about financial numbers, Masa, we're talking about strategy mainly so that was in the past every quarter.
I think only a few companies do so, like talking about company strategy on a quarterly basis. Masa wants to focus on whatever he wants to focus on for now. We don't know when, but hopefully, sooner, I hope that you will have opportunity to see and talk with Masa directly and give us more time, and please be patient with me.
Your second question about Vision Fund initially, SoftBank Group as a holding company, we are on the position as an investment company. So what will happen in the next quarter would happen in the following quarter? Of course, we have some estimate and assumption, but also we need to make sure that we look at markets and market condition environment conservatively.
Of course, smaller loss is better than bigger loss apparently. But I think as an investment company, as a management of the investment company, it's, I think, right to view our performance conservatively. And Navneet, would you like to add anything from your perspective?
Navneet Govil
Thank you, Goto. So the performance for the quarter reflects the market conditions at the end of December, and it also reflects the performance of our portfolio companies at the end of December. And in March - at the end of March, we will see what the market conditions are and how our portfolio companies are performing.
Operator
Thank you. Any other questions, please? Then we would like to take some questions from the floor. My name is as from [indiscernible] IPO market, stock exchange for Arm. Masa mentioned that looking at NASDAQ, London, New York, any specific comments on that? It's Arm, so yes why don't you comment?
Navneet Govil
We're looking at all the available markets, but no decision has been taken just yet.
Operator
Thank you very much. Then in the interest of time, that's all from the audience on the floor. I move on to questions from participants online. [Operator Instructions]. First, Mr. Nagoshi from NHK.
Unidentified Analyst
Thank you for taking my question. My name is Nagoshi from NHK. Maybe somebody asked a question before about Arm's IPO, there was a news article that you discussed with the government about the listing in London are you considering London or NASDAQ. So what's your progress on the preparation of Arm IPO? That's my first question. And second, JPY 1.5 trillion of our capacity to issue bond, what's the intention? Is it for the purpose of new investment in the future or not? Thank you.
Yoshimitsu Goto
First, about Arm, maybe Ian once again about Arm.
Ian Thornton
So we are indeed considering NASDAQ, NYSE and London, but no decision has been taken at this time. In terms of the IPO itself, I mean, to the IPO to proceed, both ARM needs to be ready and the market needs to be ready. Arm's IPO preparations are what advanced the market appear to be improving and hopefully, we'll continue to do so. And Arm itself remains fully committed to listing in calendar 2023.
Yoshimitsu Goto
Yes, thank you very much. Yes, we are grateful that a lot of markets have high interest in Arm's future IPO. We are grateful for that. About your second question, it's a rather technical. In fact, we only have a little capacity to issue bonds. So when we did expand that. We did the same thing. Once you issue 200, 300, then the remaining capacity goes down. So we don't have intention to issue like JPY 1.5 trillion of bond so it's just a technical matter.
Unidentified Analyst
Thank you.
Operator
Now we would like to take our next question. [indiscernible], please unmute.
Unidentified Analyst
Yes, thank you very much for taking question. Can you hear me okay.
Yoshimitsu Goto
Yes please.
Unidentified Analyst
I would like to ask you or your expectation on interest rate policy by Bank of Japan. So I believe that compared to central banks in U.S. and European countries, they are very much normalized, but we believe that Japanese banks are behind the steps, and there are many focus on how Bank of Japan is going to be bringing the interest rate back to normal, and with your view, what is your expectation on the interest rate policy by BOJ?
Yoshimitsu Goto
Our company doesn't have any specific comments on your question. But I can say is, that expectations on interest rate being commented by many banks and industries. Hopefully, without any surprise, we will be able to see the good lending without any hurdles. For us, our business is, of course, cheaper is better when it comes to the interest rate. However, I am not in position to say anything about that. I believe that it's even more important to see that Japan overall when it comes to interest rates. So thank you.
Operator
Thank you very much, that's all for Q&A session. Thank you very much for your questions. This concludes the SoftBank Group Corporation earnings results briefing for the nine-month period ended December 31, 2022. The video footage of this briefing will be uploaded on our corporate website.
Thank you very much once again for joining the SoftBank Group Corporation earnings results briefing for the nine-month period ended December 31, 2022.
For further details see:
SoftBank Group Corp. (SFTBY) Q3 2023 Earnings Call Transcript