Due to falling stock prices in portfolio companies and the burden of Chinese regulatory action on tech companies, Softbank reported a quarterly loss on Monday as its Vision Fund division raised $10 billion (approximately Rs 74,081 crore). Despite the drop in asset value, the Japanese tech company said the stock was devalued and would spend up to 1 trillion yen (about Rs 65,297 crore) to buy about 15% of the stock.
SoftBank CEO Son Jeong-eui compared the company to a swan carrying golden eggs, and Monday’s results highlighted problems in the investment industry.
“We’re in the middle of a blizzard,” Son said at a press conference, adding that the Vision Fund’s quarterly performance was “not proud.” Nonetheless, he stated that the company is making steady progress toward doubling the number of “golden eggs” compared to the previous year.
Alibaba, a Chinese e-commerce company, saw its value plummet by nearly a third in the second quarter, the group’s most valuable asset. It paid $ 12 billion (roughly Rs 88,897 crore) for a 7.5 percent stake in Chinese ride-hailing company Didi (approximately Rs 55,569 crore).
Coupang’s online store also lost a third of its value. Kirk Boudry, an analyst at Redex Research, said, “The strategy of disclosing information to increase value has not worked this year.
Crude Lever
According to Son, the primary metric for measuring performance should be the change in the value of the company’s assets rather than profit. In the three months to September, asset values fell by 23% to $187 billion (roughly Rs. 13,85,221 crore).
While SoftBank’s stock trades at a 50% discount, lower than the record gap that prompted the company to launch a JPY 2.5 trillion (roughly Rs. 1,63,241 crore) buyback last year, the conglomerate now has the cash to do so, according to Son.
“I’m excited because we’re undervalued in comparison to our true potential,” Son said.
To boost returns, investors have been calling for a buyback. Repurchased shares will be retired, lowering the bar for SoftBank’s largest shareholder, SoftBank founder, and CEO Masayoshi Son, to launch a management buyout.
“The buyback gives them a crude lever to influence the discount at which the shares trade,” said Boodry, who added that the slower pace could reduce share price volatility.
The Vision Fund’s India portfolio, which includes ride-hailing company Ola and logistics firm Delhivery, has the potential to provide future upside.
In an interview with Reuters, Navneet Govil, Vision Fund’s chief financial officer, said, “The pipeline is very robust.”
According to Govil, the Southeast Asian ride-hailing company Grab’s planned listing via a merger with a special purpose acquisition company (SPAC) will provide additional valuation gain.
The company’s net loss was 398 billion yen ($3.5 billion), down from a profit of 628 billion yen the previous year. The investment loss of the Vision Fund totaled 1.167 trillion yen.
Following the expiration of lock-up periods, SoftBank has been raising capital by selling off stakes in companies like Uber Technologies and DoorDash.
The company has returned $ 9.8 billion to investors (roughly Rs. 72,611 crores) and is focusing on investing another $40 billion (roughly Rs. 2,96,372 crore) in pledged capital from Softbank and Son.
The second fund had invested $33.5 billion in 157 startups by the end of the quarter. Eight of the companies have already gone public.
SoftBank’s stock, which has lost nearly a quarter of its value this year, fell 0.77 percent to 6,161 yen ahead of its earnings report on Monday.
