SoftBank Doubles Down With Buy Back After $10 Billion Vision Fund Hit

SoftBank went into quarterly losses on Monday, as its Vision Fund unit lost $10 billion (about Rs 74,081 crore) due to a fall in the share price of its portfolio companies and the weight of China’s regulatory action on tech firms .

Even as the value of its assets declined, the Japanese tech conglomerate said its stock is undervalued and is looking to buy back about 15 per cent of its shares at JPY 1 trillion (about Rs 65,297 crore). ) will cost.

while the CEO masayoshi sono have compared softbank For the “golden egg” goose, Monday’s results underscore adversity for the investment business.

“We are in the middle of a blizzard,” Son told a news conference, adding that he was “not proud” Vision Fund performance in the quarter. Yet he said the company is taking steady steps to double the number of “golden eggs” compared to last year.

The group’s biggest asset, the Chinese e-commerce firm Alibaba, saw its valuation fall by nearly a third in the second quarter. Its stake in the Chinese ride-hailer Elder sister, acquired for $12 billion (approximately Rs.88897 crore), valued at $7.5 billion (approximately Rs.55,569 crore).

Another notable hit was online retailer Coupang, which dropped a third of its value.

“The strategy of creating the perception of increased value by making things public hasn’t really worked this year,” said Kirk Boodry, a Redex Research analyst.

crude lever

Son says that change in the value of group assets rather than profit is the primary measure by which performance should be assessed. The value of assets fell by 23 per cent to $187 billion (approximately Rs 13,85,221 crore) in the three months to September.

While SoftBank trades at around 50 per cent discount, which is less than the record margin of JPY 2.5 trillion (about Rs 1,63,241 crore) buybacks last year, the group now has capital to repurchase, Son said.

“I am excited because we are left untouched compared to our true strength,” said the son.

Investors are seeking buybacks to increase returns. The repurchased shares will be retired, a move that lowers the bar for Son, the top shareholder of SoftBank, to potentially initiate a management buyout.

“The buyback gives them a crude lever to effect a discount on trading shares,” Boodry said, adding that a more gradual move could reduce share price volatility.

Vision Fund’s future includes India’s portfolio with ride-hailers Hailstone and logistics firm delhivery Listing targeting.

“The pipeline is very strong,” Navneet Govil, chief financial officer of Vision Fund, told Reuters in an interview.

Schematic List of Southeast Asian Ride-Halers pounce Govil said the merger with a Special Purpose Acquisition Company (SPAC) would provide more valuation benefits.

The group reported a net loss of JPY 398 billion (approximately Rs 25,988 crore) compared to a profit of JPY 628 billion (approximately Rs 41,006 crore) a year ago. Vision Fund’s investment loss totaled JPY 1.167 trillion (approximately Rs 76,208 crore).

SoftBank is raising capital by reducing stake in companies like ride-hailers Uber and food delivery firms Doordash After the lock-up period is over.

The group has returned $9.8 billion (about Rs 72,611 crore) to investors and is focusing on investing through its second Vision Fund, which has $40 billion (about Rs 2,96,372 crore) in committed capital from SoftBank and Son. ) Huh.

The second fund had invested $33.5 billion (approximately Rs 2,96,372 crore) in 157 startups at the end of the quarter. Eight of these companies have already been listed.

Shares of SoftBank, which have fallen nearly a quarter this year, closed 0.77 per cent lower at JPY 6,161 (about Rs 4,000) ahead of Monday’s earnings call.

© Thomson Reuters 2021