SoftBank has lost more than $4 billion from its bet on China ride-hailing company Didi Chuxing.
The company's spending fell into the red after Didi was accused of data security lapses by China regulators on the back of its New York initial public offering.
SoftBank acquired a 20.1% stake in Didi for $11.8 billion in 2019. Now, the same stake is worth roughly $7.8 billion. After Didi was accused of security lapses and was threatened with possible penalties, the company's share price plummeted. Since its debut, Didi's U.S.-listed shares dropped by 43% - nearly halving its market valuation.
The company's stock opened at $14.14 per share at its New York debut. The stock is expected to open at $8.13 per share Monday.
SoftBank has made heavy investments in China technology companies, which make up about a quarter of the Vision Fund's portfolio. The investments have left the company exposed to regulatory actions in recent months.
Earlier in the month, China implemented stricter rules and oversight for companies wishing to list abroad. The move also negatively affected several other companies backed by SoftBank's vision fund. As pressure from China's cyberspace regulator intensified, several companies opted to cancel their planned IPOs.
Keep, a fitness application backed by SoftBank, recently withdrew its plan to list in the U.S. Over the weekend, China announced sweeping rules changes for after-school tutoring companies. Zouvebang, an online education startup also backed by SoftBank, expects its home tutoring business to be negatively affected by the new rules.
Sources with knowledge of the matter said SoftBank had initially planned to sell some of its Didi stake when it goes public. The decision was made after bankers forecast the offering could value the company at more than $100 billion. Sources said SoftBank abandoned that plan after Didi's valuation deflated.
Despite its $4 billion paper loss on Didi, SoftBank's other investments outside of China have performed relatively well. Analysts said Didi's stock price could also recover when it finally resolves its issues with regulators. Some analysts have cautioned that the investigation against Didi could last for months and it is unlikely to come to a rapid conclusion.