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    9434   JP3732000009

SOFTBANK CORP.

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SoftBank profit wiped out by Vision Fund losses, second fund scaled back

02/12/2020 | 09:43pm EST
FILE PHOTO: The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo

Quarterly profit at SoftBank Group Corp was almost wiped out as the Japanese technology giant was hit for a second straight quarter by losses at its $100 billion Vision Fund.

Wednesday's dismal results could further dampen investor enthusiasm for founder Masayoshi Son's big bets on untested start-ups. While Son told a news conference SoftBank had turned a corner, he also said he has been forced to scale back a second Vision Fund while investing with only SoftBank's own capital.

That marks a major climbdown from July, when SoftBank said it had attracted $108 billion in pledges for a second mega-fund.

More pointedly, it shows how the bailout of start-up WeWork last year and other missteps have put a chill on the tech investing scene and given SoftBank shareholder Elliott ammunition to lobby for change.

"We have caused a lot of concern," Son said in Tokyo following the results, adding he needs to "give everyone peace of mind" to secure outside funds for Vision Fund 2.

Group profit was 2.6 billion yen ($24 million) in the October-December quarter versus 438 billion yen a year before. The Vision Fund posted an operating loss of 225 billion yen ($2.05 billion) for the quarter compared with a 176 billion yen profit in the same period a year earlier.

But Son, known for an ebullience and charisma that is still rare in corporate Japan, said the company's performance was already improving.

"The tide is turning," he said.

BIG STAKE

"Softbank should focus on one thing, shareholder value creation," said Jeffries analyst Atul Goyal in a note to clients ahead of the earnings.

Son pointed to a rally in prices at the Vision Fund's handful of listed investments and news overnight that a U.S. federal judge had rejected an antitrust challenge to the proposed merger of SoftBank's Sprint Corp and T-Mobile US Inc.

Shares of SoftBank finished up 12% in Tokyo before the results and after the U.S. court decision.

Son has long argued SoftBank's shares are undervalued, a position shared by U.S. hedge fund Elliott Management, which has recently emerged as a prominent shareholder. Elliott, one of the world's best known activist investors, is pushing for changes including $20 billion in stock buybacks, sources said last week.

SoftBank has held discussions with Elliott and is aligned on improving shareholder value, Son said, adding that while open to potentially buying back shares, he was in "no hurry" to sell part of a 26% shareholding in Alibaba to fund buybacks.

The Vision Fund, which is backed by Saudi Arabia and has single-handedly changed the face of tech investing, said it had invested $74.6 billion in 88 companies as at the end of December, when those investments were worth $79.8 billion.

Analysts have said it is difficult to evaluate SoftBank's performance due to a lack of disclosure around Vision Fund's internal valuations.

Son's investing credentials took a hit in the August-September quarter when the Vision Fund recorded an $8.9 billion operating loss.

Since then, a slew of portfolio companies - from hotel-booking platform Oyo to cloud robotics firm CloudMinds - have cut jobs and come under pressure to demonstrate the long-term viability of their business models.

The fund itself has also lost key employees.

(This story has been refiled to correct spelling of 'peace' in fifth paragraph)

By Sam Nussey


ę Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
ALIBABA GROUP HOLDING LIMITED 1.57% 125.54 Delayed Quote.-47.37%
AT HOME GROUP INC. -0.08% 36.99 End-of-day quote.0.00%
ATUL LTD 0.46% 8903.75 End-of-day quote.38.48%
CHANGE INC. 3.72% 1979 End-of-day quote.-43.86%
FAST RETAILING CO., LTD. 0.07% 67860 End-of-day quote.-26.61%
SOFTBANK CORP. -0.95% 1515.5 End-of-day quote.17.21%
SOFTBANK GROUP CORP. 7.94% 5508 End-of-day quote.-31.65%
SPRINT CORPORATION 0.00%End-of-day quote.0.00%
T-MOBILE US 1.31% 117.15 Delayed Quote.-18.16%
VISION INC. 5.22% 1350 End-of-day quote.30.31%
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Analyst Recommendations on SOFTBANK CORP.
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Financials
Sales 2022 5 612 B 49 427 M 49 427 M
Net income 2022 521 B 4 590 M 4 590 M
Net Debt 2022 4 043 B 35 604 M 35 604 M
P/E ratio 2022 13,8x
Yield 2022 5,69%
Capitalization 7 126 B 62 738 M 62 759 M
EV / Sales 2022 1,99x
EV / Sales 2023 1,92x
Nbr of Employees 37 821
Free-Float 58,2%
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Mean consensus OUTPERFORM
Number of Analysts 19
Last Close Price 1 515,50 JPY
Average target price 1 687,84 JPY
Spread / Average Target 11,4%
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Managers and Directors
Junichi Miyakawa President, CEO & Representative Director
Kazuhiko Fujihara Chief Financial Officer & Director
Ken Miyauchi Chairman
Takashi Tsutsui Chief Scientist & Managing Executive Officer
Keiichi Makizono Chief Information Officer
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