SoftBank Group chair and CEO Masayoshi Son. Picture: REUTERS/ISSEI KATO
SoftBank Group chair and CEO Masayoshi Son. Picture: REUTERS/ISSEI KATO

Tokyo — Masayoshi Son is launching a new asset management venture to buy stocks in publicly traded companies, expanding SoftBank Group’s investment efforts as it rebounded from record losses to profitability.

The Tokyo-based company reported net income of ¥1.26-trillion for the three months ended June 30, following a loss of ¥1.44-trillion  three months earlier. The profit was boosted by more than ¥1-trillion  in one-time gains from the sale of Sprint and shares in T-Mobile US.

Son has shifted his attention to investments in recent years after building his fortune in the telecom sector. The asset management initiative expands on previous efforts such as the $100bn Vision Fund, which he set up three years ago to take stakes in private start-ups. The new arm has already purchased shares in Apple, Amazon and Facebook.

“As an investment company, we need to explore various angles and scope. But our focus is still on companies driving the information revolution,” said Son. “This is the purpose of our company.”

SoftBank will own 67% of the asset management firm, while Son personally will own the rest. The unit has about $555m in capital, he said.

It’s not clear why Son thinks SoftBank will have an edge in picking stocks, moving into a field crowded with heavyweights such as Fidelity Investments and BlackRock. The effort may increase the volatility of SoftBank earnings, which has grown with initiatives such as  the Vision Fund.

“Investors will need to build greater risk into their expectations — and Masa investing alongside is not a good look,” said Kirk Boodry, an analyst at Redex Research who writes for Smartkarma. “Launching a new investment vehicle targeted at public tech when Nasdaq is near all-time highs with bubble concerns seems like a good way to keep the share price discount to public value from closing.”

The Japanese billionaire has pulled off a remarkably speedy comeback after the worst loss in his company’s 39-year history. A global rally in technology shares lifted the value of SoftBank’s stakes in publicly traded firms like Uber Technologies Inc. and improved the prospects for start-ups in its portfolio, from China’s Didi Chuxing to South Korea’s Coupang.

Far from striking a winning pose on Tuesday however, Son emphasised the importance of defence. He opened his presentation with slides depicting a 16th century battle between two Japanese lords. Oda Nobunaga, who would go on to unify Japan, won the engagement by sheltering his riflemen inside a wooden structure to protect them from samurai on horseback.

“You can’t skimp on defence,” Son said. “We need to strengthen our defence. Defence is cash.”

SoftBank also stopped reporting operating profit, long a key metric tracked by investors. It said the figure is “no longer meaningful” as the company becomes a “strategic investment holding company”.

SoftBank is in the process of offloading ¥4.5-trillion  in assets to fund share repurchases and to pay down debt. The company already raised ¥4.3-trillion  through sales that include stakes in T-Mobile, Alibaba and its domestic telecom unit, completing about 95% of the programme.

The Vision Fund returned to profitability, following a ¥1.13-trillion  loss in the previous quarter. SoftBank booked a ¥296.6-billion  gain on Vision Fund investments in the quarter, including ¥111.4bn  in realised gains after selling a portion of its shares in four listed portfolio companies. About $1.4bn of the unrealised gains came from holdings in public companies, with Uber responsible for about $700m and Ping An Good Doctor, Vir Biotechnology  and Guardant Health contributing about $200m each.

“It’s still too early to say that it will be all profits at the Vision Fund going forward,” Son said in a livestreamed briefing. “But things are turning around in a big way.”

Several SoftBank-backed companies have also pulled off successful initial public offerings, raising the prospects for more in the future. Online home-insurance provider Lemonade  more than doubled in the days after its initial public offering last month, while oncology drug developer Relay Therapeutics has surged about the same amount since its trading debut.

Beike Zhaofang, a Chinese online property brokerage backed by SoftBank, said last week it is seeking to raise about $2bn in a US IPO. DoorDash, a US food delivery company backed by SoftBank, has filed paperwork for a public stock listing. Online insurance platform Policybazaar and e-commerce giant Coupang are preparing for offerings in 2021.

Son confirmed that SoftBank is looking to sell or take public Arm, the chip design firm that he bought four years ago for $32bn. He said he may accelerate plans for an Arm IPO from the original 2023 schedule or he may sell part or all of the firm. Bloomberg News reported earlier in August that Nvidia  is in advanced talked to acquire Arm.

Son put plans for a second Vision Fund on hold after missteps, including the meltdown at WeWork. Now, the fund’s upbeat results and a renewed investor appetite for risk could revive the idea, according to Atul Goyal, senior analyst at Jefferies.

“Our strategy hasn’t changed,” Son said at the briefing. “We still plan on unicorn hunting with Vision Fund 2, 3 and so on.”

Bloomberg 

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