SoftBank comeback stays on track with $6 billion profit4 min read . Updated: 10 Nov 2020, 01:50 PM IST
- Japanese conglomerate’s Vision Funds posted big investment gains
Japan’s SoftBank Group Corp., the world’s largest technology investor, is ready to go on the offensive again after a year of struggling with missteps, losses and tanking markets.
The conglomerate logged a profit of more than $6 billion in the July-September quarter, driven by rising share prices and valuations for some of its portfolio companies.
The strong performance continues a remarkable comeback for the Japanese conglomerate—best known for its $100 billion Vision Fund—as well as its mercurial Chief Executive Masayoshi Son.
Half a year ago, the company had to report a $9 billion annual loss, its worst ever. Now the share price is rising—it was up another 5.4% on Monday—investment returns are up and the company is sitting on a huge cash pile.
“We can go on the attack at the same time as we keep strengthening our defenses," Mr. Son said at a news conference in Tokyo, the first in six months where he spoke to reporters in person.
There was one sour note. The company said its high-profile foray into public-market investing, which has given it a portfolio of tech stocks such as Amazon.com Inc. that are worth nearly $17 billion, had a stumble in the quarter by losing nearly $3 billion on derivatives transactions.
SoftBank has faced pressure for change from investors including activist Elliott Management Corp., which bought a big stake in Mr. Son’s company earlier this year.
In one response to investors’ concerns, Mr. Son removed his three deputies from the SoftBank board, saying he wanted to increase the proportion of independent directors to provide more checks on his power. The three—Vision Fund CEO Rajeev Misra, SoftBank Chief Operating Officer Marcelo Claure and Chief Strategy Officer Katsunori Sago—will retain their operational authority, he said.
Yasir al-Rumayyan, the head of Saudi Arabia’s Public Investment Fund—Vision Fund’s largest outside investor—also resigned effective Monday.
In the six months ended Sept. 30, SoftBank booked an investment gain of ¥2 trillion, equivalent to $19 billion, including ¥1.3 trillion from improved performance at the Vision Fund as well as its more modest successor, Vision Fund 2. The gains put both funds solidly in the black, with Vision Fund 1 valued at $1.4 billion more than the cost of the 83 investments it was still holding at the end of the quarter.
For the July-September quarter, net profit came to ¥627.5 billion, or $6.1 billion. In the July-September quarter a year ago, SoftBank logged a $6.4 billion net loss. That was caused in part by writing down the value of its investment in office-share firm WeWork, which Mr. Son described as a lapse of judgment on his part.
One star performer this past quarter has been Chinese online real-estate broker Beike Zhaofang, a Vision Fund 2 investment whose share price has shot up since it went public in New York in August. SoftBank said it had booked paper gains of ¥537 billion on the investment. Vision Fund 2 had 13 investments valued at $7.6 billion at the end of September, $5 billion more than cost, SoftBank said.
SoftBank has been the sole funder for Vision Fund 2 after an attempt to attract outside investors flopped last year. Mr. Son said Monday the door is always open for outside investors.
Since March, SoftBank has been implementing one of the world’s most aggressive asset-sale and share-repurchase programs, signing more than $90 billion in deals—including a September agreement to sell U.K. chip designer Arm Holdings to U.S. chip maker Nvidia Corp. for up to $40 billion.
Those deals, which include the sale of most of its stake in T-Mobile US Inc. and a reduction of its stake in its Japanese mobile-phone unit, have turned SoftBank into a company whose main business is investments.
It has bought back around $11 billion of its own stock so far, with a further $12 billion or so to come.
It is repurchasing debt as well, but the company still has potentially tens of billions of dollars in surplus cash to spend. Possibilities include further buybacks, new investments or even a bid by Mr. Son to take the company private.
He said Monday the company was “keeping all options at hand" and declined to discuss the possibility of a management buyout. He said it was unlikely SoftBank would buy another company, such as a telecommunications firm, with a business whose operations he would have to run.
Investors have been concerned about SoftBank’s recent move into publicly listed tech stocks and options, at one point pushing SoftBank’s share price down as much as 7%. The unit that is mainly responsible, a new asset-management arm named SB Northstar, is overseen and partly funded by Mr. Son himself.
SoftBank said it had almost $16.8 billion in tech stocks at the end of September, including more than $6 billion in Amazon and $2 billion in Facebook Inc.
Mr. Son brushed aside the concerns about such investments and the ¥292 billion ($2.8 billion) derivatives loss reported for the quarter, which SoftBank said included losses on futures contracts on stock indexes. He said the fair value of SoftBank’s options at the end of September was $3.4 billion, or only 1.2% of the value of SoftBank’s equity holdings and not enough to make much of a dent even if all the options went to zero.
While some have questioned why Mr. Son is spending so much time on stock trading when his primary interest has traditionally been younger, earlier-stage companies, he said the asset-management unit’s bets were in line with SoftBank’s goal of investing in companies that would power an artificial-intelligence revolution.
This story has been published from a wire agency feed without modifications to the text
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