Technology
Wednesday, August 7th, 2024 2:20 pm EDT
Key Points
- Investment Gains and Losses: SoftBank Group reported a 1.9 billion yen ($12.9 million) gain on its Vision Fund for the fiscal first quarter ending in June, marking a return to profitability. This gain was driven by successes in Chinese portfolio companies like ByteDance, but the Vision Fund segment overall posted a significant loss of 204.3 billion yen, largely due to administrative expenses and third-party investor impacts.
- Share Buyback and Market Volatility: SoftBank announced a plan to buy back up to 6.8% of its shares, totaling 500 billion yen ($3.4 billion), to address shareholder concerns about its market capitalization relative to asset value. This move comes amid recent volatility, including a nearly 19% drop in SoftBank’s shares due to broader declines in Japanese stocks and global market instability.
- Performance Boost from Key Investments: SoftBank’s net sales rose 9.3% year-on-year to 1.7 trillion yen, with net profit reaching 10.5 billion yen, a recovery from a 316.2 billion yen loss the previous year. This improvement was bolstered by significant investment gains from Alibaba and T-Mobile shares, and the company is focusing on AI and tech investments to enhance future growth.
SoftBank Group experienced a significant turnaround in its fiscal first quarter ending in June, recording a 1.9 billion yen ($12.9 million) investment gain on its Vision Fund tech investment arm, shifting back into profitability. This gain was largely driven by successful investments in some of SoftBank’s Chinese portfolio companies, notably ByteDance, the owner of TikTok. However, the overall Vision Fund segment posted a substantial 204.3 billion yen loss, taking into account not only investment performance but also administrative expenses and losses attributable to third-party investors.
Despite this loss, SoftBank announced a major buyback initiative, planning to repurchase up to 6.8% of its shares, amounting to 500 billion yen ($3.4 billion). This move comes in response to shareholder pressure, as the company’s market capitalization has been significantly lower than the value of its assets. The buyback is intended to boost the company’s share price and restore investor confidence. Investment firm Elliott Management, which had rebuilt its position in SoftBank, was reportedly pushing for this repurchase program.
In comparison, SoftBank had posted a 159.77 billion yen gain in its Vision Fund during the same quarter last year but faced a 57.53 billion yen loss in the March quarter. The recent successes of the Vision Fund can be attributed to the tech stock rally and significant holdings, including the successful initial public offering of chip designer Arm, of which SoftBank owns approximately 90%.
However, SoftBank is grappling with volatile public markets. The company’s shares dropped nearly 19% in one day due to a broader decline in Japanese stocks following an interest rate hike by the Bank of Japan. Although Japan’s main indexes rebounded, global markets remain unstable due to concerns about the world economy and the high valuations driven by technology stocks.
SoftBank aims to reposition itself as a key player in the artificial intelligence (AI) boom. Management has emphasized investments in companies like Arm and self-driving startup Wayve as evidence of its readiness to capitalize on AI growth. Masayoshi Son, SoftBank’s high-profile founder, has re-emerged to share his ambitious vision for AI, predicting it will become 10,000 times smarter than humans in a decade.
Net sales for SoftBank Group in the June quarter increased by 9.3% year-on-year to 1.7 trillion yen, surpassing analyst expectations. The company posted a net profit of 10.5 billion yen, a stark contrast to the 316.2 billion yen loss in the same quarter the previous year. This improvement was partly due to significant investment gains from Alibaba shares (235.7 billion yen) and T-Mobile shares (179.1 billion yen).
SoftBank’s growth into one of Japan’s largest companies can be attributed to Son’s early investment in Alibaba in 2000, which has yielded substantial returns over the years. Recently, SoftBank has been reducing its Alibaba stake to fund new investments in AI, reflecting its strategic shift towards future technologies.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/08/07/softbank-earnings-report-q1-fy-2024.html
