Masayoshi Son was uncharacteristically restrained when he revealed on Thursday that the Vision Fund lost $27 billion on its investments last year.

He refrained from tongue-in-cheek slides depicting SoftBank geese laying the golden eggs of the AI ​​revolution or a unicorn with wings flying above the “Valley of Coronavirus”. He didn’t compare himself to Jesus Christ.

Instead, he started his presentation with a huge Chinese character painted in white on a deep blue background: Mamori. To “defend” or “protect”, Mamori heralds a sea change in the billionaire founder’s aggressive high-risk strategy.

“We put an umbrella when it rains,” Son said. “It’s time to strengthen our defense now.”

Son has already gone on the defensive. Two years ago, he promised to reduce oversized checks to businesses after a previous record loss from bets that deteriorated in the market turmoil triggered by the Covid-19 disruption.

But the rebound was quick. He used a $41 billion emergency asset sale to fund the largest stock buyback in Japanese history and reduced SoftBank’s net debt by $14 billion.

Investors and analysts say the difference between then and now is that SoftBank’s fortunes aren’t so easily reversed and a quick recovery is far from guaranteed, raising fundamental questions down the road. to be followed by Son.

“It looks like Masa is out of ideas,” said a SoftBank investor.

The monetary stimulus during the pandemic that fueled high-growth and unprofitable tech companies around the world is coming to an end just as Russia’s invasion of Ukraine fuels market volatility.

An expected hike in U.S. interest rates designed to control inflation sparked a sell-off in speculative assets, while Beijing’s crackdown on tech sent stocks tumbling. SoftBank’s stake in Alibaba, which represents 22% of its net asset value, means Son is particularly vulnerable to regulatory attacks from China.

The risk was amplified in mid-March when shares of Jack Ma’s company fell to $73, the lowest level since 2016. On that day, SoftBank came “unbelievably close” to a call $6 billion margin on the loan borrowed against Alibaba stock, according to a person with knowledge of the situation.

Chinese regulators worked quickly to reassure markets, but it was a trying time for investors. “I think the lights would be out if it wasn’t for China doing what they did,” a person close to Son said, referring to the reassurance.

“We do not comment on individual funding details,” SoftBank said. “The margin loan balance is $6 billion, which is not a concern given its proportion in our group’s total asset-backed funding, as well as available cash (2.9 billion yen in March 2022),” the company said.

The Vision Fund’s publicly traded companies are on average down 62% from their listings. Of 24 IPOs in 2021, only three have gained in price since trading began, said Kirk Boodry, technology analyst at Redex Research in Tokyo.

Son appears to be running out of options to restore investor confidence, with share buybacks becoming less effective in preventing a further drop in SoftBank’s share price.

The 1 trillion yen ($7.8 billion) buyback program announced last fall has not only failed to stem the 40% fall in stocks over the past year, but has “concentrated risk systemic and destroys value,” said Amir Anvarzadeh at Asymmetric Advisors.

The group could also sell its stakes in Chinese e-commerce giant Alibaba or its Japanese telecommunications unit, SoftBank Corp, but the disposals would mean Son would not be able to borrow against those shares to fund new investments.

The telecoms business is also very profitable and generates regular cash for the group, notes a longtime SoftBank shareholder. Selling Alibaba shares at less than a third of their peak value in October 2020 would also be painful for Son.

“It’s hard to say how long this will last,” said a Vision Fund insider. “The factors are very different [to the Covid-19 crisis].”

Son was hopeful of listing Arm, the British chip designer SoftBank bought for $31 billion in 2016.

SoftBank plans to take the company public after its sale to Nvidia collapsed due to regulatory hurdles. It has already secured billions of dollars in borrowed loans from banks involved in listing against Arm’s stock.

As SoftBank sank into its biggest ever loss, Arm posted record annual revenue of $2.7 billion, up 35% from a year earlier. Revenue from its licensing business rose by nearly two-thirds, with royalties rising by a fifth to $1.5 billion, surprising some analysts after years of poor performance.

“When I look at what we’ve accomplished in the last year, I really see the validation of the strategy we put in place three or four years ago coming to life,” chief executive Rene Haas told the Financial Times.

But Son also had to scale back his expectations for Arm, with his target valuation of $66 billion now in doubt, with rising interest rates and changing investor sentiment chilling quotes.

“All I can say is that we are preparing,” Haas said when asked if the IPO will be postponed.

“I don’t think Arm will increase as much as hoped. . . this is a failed flush, but all investment banks have a strong incentive to back, back and lend given the IPO fees,” Anvarzadeh said.

SoftBank shares rose 12% the day after Son’s presentation, but Boodry said the optimism may be premature.

“It seems like some people think that because there was a record loss things kind of got reset – we don’t think so,” Boodry said, “we think there’s a reason for to worry.”

Additional reporting by Leo Lewis in Tokyo