SoftBank steps up asset sales from sinking portfolio
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[August 09, 2022] By
TOKYO (Reuters) - SoftBank Group Corp is
accelerating asset sales after its flagship Vision Fund unit booked
nearly $50 billion in losses in just six months, but Chief Executive
Masayoshi Son faces narrowing options and slumping valuations, analysts
Son said on Monday that he is in discussions to sell asset manager
Fortress, without commenting on a valuation. SoftBank also raised $2.4
billion selling shares in T-Mobile US during the latest quarter, while
unloading a variety of other holdings.
But as valuations fall, easy options for raising cash are getting harder
to come by.
With SoftBank having shifted focus from operating companies to tech
investing, and Son staking his reputation on generating big returns that
can be recycled into further tech bets, the billionaire will be keen to
avoid selling Vision Fund assets at a loss, analysts said.
"Most of the portfolio is underwater, making the case to sell harder to
justify," Redex Research analyst Kirk Boodry wrote in a note. He pointed
to e-commerce firm Coupang and food delivery firm DoorDash as potential
Vision Fund exited a swathe of assets in the April-June quarter -
including ridehailer Uber Technologies and property platforms Opendoor
Technologies and KE Holdings, which operates China's Beike - for a
realised gain of $5.6 billion.
SoftBank sold the final tranche of Uber shares at a loss, Boodry
calculates, and generated a total return of just $1.5 billion on the
stake. Son backed the firm with an eye on autonomous driving, with
SoftBank becoming the largest shareholder, but Uber abandoned its
efforts to develop a self-driving car.
"SBG (SoftBank Group) is willing to monetise any asset at a reasonable
price," Jefferies analyst Atul Goyal wrote in a note.
"It is a good sign for SBG shareholders, though it does not bode well
for ... investee companies".
Son has sold assets in past downturns to raise cash, including the early
days of the COVID-19 pandemic during which he said startups had fallen
into the "valley of the coronavirus".
[to top of second column]
A journalist raises her hand to ask a question to Japan's SoftBank
Group Corp Chief Executive Masayoshi Son during a news conference in
Tokyo, Japan, November 5, 2018. REUTERS/Kim Kyung-Hoon/File
SoftBank agreed to sell chip designer Arm to Nvidia in 2020 but the deal later
stumbled over regulatory hurdles. Son still hopes to list Arm in the United
The Japanese conglomerate has also cashed in on its large and liquid stake in
e-commerce firm Alibaba to raise funds.
Times have changed, however, with the downturn in valuations.
While SoftBank raised $17.3 billion in the last few months on its Alibaba
holdings through prepaid forward contracts, the Chinese firm has lost more than
two-thirds of its value from highs in late 2020.
Son has also pledged to "play defence" and on Monday laid out a further scaling
back of investing activity and cost cutting across the group.
Some analysts say private asset prices may have further to fall, potentially
raising the bar for efforts to generate returns, and Son said SoftBank had been
in a bubble in valuations.
"(The) private book is still far more inflated than public listed assets are and
hence the real downside could still be material," Jefferies analyst Goyal wrote.
While reshaping its portfolio, SoftBank has also announced a 400 billion yen
($2.97 billion) buyback of its own shares, in addition to an existing 1 trillion
yen repurchase programme that is 70% complete and due to expire in November.
"It's possible the structure of the company will be reviewed, including through
a management buyout, in the not too distant future," SMBC Nikko Securities
analyst Satoru Kikuchi wrote in a note.
($1 = 134.8500 yen)
(Reporting by Sam Nussey; Editing by Miyoung Kim and Edmund Klamann)
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