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


A pedestrian wearing a protective mask walks past signs advertising SoftBank Corp., near a Tokyo, Japan store on May 15, 2020.

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SoftBank Group Corp slumped to a quarterly loss on Monday, as its Vision Fund unit took a $10 billion hit from a decline in the share price of its portfolio companies and as China’s regulatory crackdown on tech firms weighed.

While the stock value has been falling, Japan’s tech conglomerate stated that its stock was undervalued. It will purchase back close to 15% of its shares for as high as 1 trillion yen ($9billion), even though the price of its assets is dropping.

SoftBank CEO Masayoshi Son compared it to a goose that lays “golden eggs”, but Monday’s results highlight the negatives facing the investment company.

Son stated that the Vision Fund had performed poorly in quarter one. However, he stated that they were making progress towards doubling the “golden egg” number compared to last.

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Alibaba, China’s largest asset and e-commerce platform, fell by about a third during the second quarter. Chinese ride-hailer company Alibaba is its largest stake. DidiThe acquisition of a $12 billion asset was worth $7.5 billion.

Coupang was also a notable winner, losing a third to online retailers.

Kirk Boodry, Redex Research analyst said that “the strategy of letting’s make the perception of increased value by making things public hasn’t really worked this past year.”

‘Crude lever’

Son believes that performance can be measured by the changes in group assets’ value rather than profits. The three months ending September saw asset values plummet by 23 percent to $187 billion.

SoftBank shares are trading at around 50% off, less than the record gap which prompted the launch of a 2.5 trillion yen buyback in the future, but the conglomerate still has enough capital to repurchase them now, Son stated.

Son declared, “I feel excited because we have been discounted when compared with our true strength.”

Investors are calling for a buyback in order to increase returns. SoftBank’s biggest shareholder Son is now less likely to purchase repurchased stock. This will lower the hurdle for Son to possibly launch a management takeover.

Boodry stated that buybacks give them an easy way to affect the share prices at a discount. He also suggested that a slower pace could reduce volatility.

The Vision Fund’s India portfolio includes Ola, a ride-hailer and Delhivery targeted listings. 

“The pipeline has a lot of strength,” Navneet Govin, Vision Fund’s chief finance officer, stated to Reuters in an interview.

Govil stated that the planned acquisition of Southeast Asian ride-hailer Grab by a merger with an SPAC (special purpose acquisition company) will bring additional value.

Its net loss was 398 billion Yuan ($3.5 billion), compared to its profit of 628 Billion yen last year. Vision Fund invested 1.167 trillion Japanese yen.

SoftBank is raising capital through the sale of stakes in ride-hailing companies like Ride-hailer Uber Technologies and food delivery firm DoorDash following the expiry of lock-up periods.

This group returned investors $9.8billion and now invests through the Vision Fund which boasts $40bn in committed capital.

By the end quarter, the third fund had already invested $33.5 million in 157 start-ups. Eight of the listed firms have already been publicized.

SoftBank shares lost about a quarter of this year and closed at 6,161yen, 0.77% lower than earnings.