Blizzard-hit SoftBank launches buyback after $ 10 billion Vision Fund loss

The logo of SoftBank Group Corp will be displayed at the SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017. REUTERS / Issei Kato

  • The Vision Fund unit reported an investment loss of $ 10 billion
  • The shares in the e-commerce company Coupang lost a third during the quarter
  • Ride-hailer Didi valued 40% below acquisition cost
  • SoftBank will spend up to $ 9 billion to buy back shares
  • Son lost $ 1.3 billion by investing in SB Northstar

TOKYO, Nov. 8 (Reuters) – SoftBank Group Corp (9984.T) fell to a quarterly loss on Monday, when the Vision Fund unit hit $ 10 billion from a decline in the share price of portfolio companies and as a result of China’s regulatory decline at technology companies weighed.

Even when the value of the assets falls, the Japanese technology conglomerate said the stock is undervalued and will spend up to 1 trillion yen ($ 9 billion) to buy back almost 15% of the shares.

While CEO Masayoshi Son has compared SoftBank to a goose that lays “golden eggs”, Monday’s results underline the headwinds for the investment business.

“We’re in the middle of a snowstorm,” Son told a news conference, adding that he was “not proud” of Vision Fund’s performance this quarter. Nevertheless, he said that the company took regular steps to double the number of “gold eggs” compared to last year.

The group’s largest asset, the Chinese e-commerce company Alibaba, saw its valuation fall by around a third in the second quarter. Its stake in Chinese ride-hailer Didi (DIDI.N), bought for $ 12 billion, was valued at $ 7.5 billion.

Another notable hit was the online retailer Coupang, which gave up a third of the value.

“The strategy of letting us create a perception of added value by publishing things has not really worked this year,” said Redex Research analyst Kirk Boodry.


Son says the change in the value of the group’s assets instead of profit is the primary measure of performance to be measured. Asset values ​​fell by 23% to $ 187 billion during the three months to September.

While SoftBank shares are trading at around a 50% discount, lower than a record gap that triggered the launch of a possible repurchase of 2.5 trillion yen last year, the conglomerate has the capital to make repurchases now, Son said.

“I’m excited because we’re down compared to our true strength,” Son said.

Investors have called for a buyback to increase returns. Repurchased shares will be withdrawn, a move that lowers the bar for Son, SoftBank’s top shareholder, to potentially launch a management acquisition.

“The buyback gives them a rough lever to influence the discount the shares are traded at,” Boodry said, adding that the more gradual pace could reduce stock price volatility.

Future upside for Vision Fund includes the India portfolio with ride-hailer Ola and the logistics company Delhivery aimed at listings. read more

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

The planned listing of the Southeast Asian ride-hailer Grab via a merger with a special purpose acquisition company (SPAC) will provide further valuation, Govil said.

The group’s net loss of 398 billion yen ($ 3.5 billion) compared to a profit of 628 billion yen a year earlier. Vision Fund’s investment loss was 1.167 trillion yen.

SoftBank has raised capital by cutting holdings in companies such as ride-hailer Uber Technologies (UBER.N) and the food delivery company DoorDash (DASH.N) after the end of lock-in periods.

The group has returned $ 9.8 billion to investors and is focusing on investing through its second Vision Fund, which has $ 40 billion in committed capital from SoftBank and Son itself.

The other fund had invested $ 33.5 billion in 157 startups by the end of the quarter. Eight of these companies are already listed on the stock exchange.

Son said he lost 150 billion yen through his personal investment in SB Northstar, the group’s trading group in derivatives and whose activities have been wound up.

The billionaire also invests his own money in SoftBank’s Latin American funds, the company said.

“It’s tough to take a risk on yourself,” Son said, adding that he is willing to take a chance as SoftBank’s captain.

SoftBank shares, which have lost around a quarter this year, closed down 0.77% to 6,161 yen ahead of earnings on Monday.

($ 1 = 113.3500 yen)

Reporting by Sam Nussey; Edited by Himani Sarkar, David Dolan, Emelia Sithole-Matarise and Louise Heavens

Our standards: Thomson Reuters Trust Principles.

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