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

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

November 9, 2021: -On Monday, SoftBank Group Corp slumped to a quarterly loss, 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.

The value of its assets slide, the Japanese tech conglomerate said its stock is undervalued and spending to 1 trillion yen buying back almost 15% of its shares.

While CEO Masayoshi Son has likened SoftBank to a goose-laying “golden egg,” Monday’s results underscore the headwinds for the investment business.

“We are in the middle of a blizzard,” Son told a news conference, which added he was “not proud” of the Vision Fund’s performance in the quarter. Yet, he said the company makes steady steps to double the “golden eggs” numbers compared to last year.

The group’s most significant asset, Chinese e-commerce firm Alibaba, saw its valuation fall by around a third in the next quarter. Its stake in Chinese ride-hailer Didi, acquired for $12 billion, valued at $7.5 billion.

Another notable hit was online retailer Coupang, giving a third of its value.

“The strategy of let’s create the perception of enhanced value by taking things the public hasn’t worked this year,” Redex Research analyst Kirk Boody said.

Son says the change in the value of the group’s assets rather than profit is the primary measure by which performance should be gauged. Asset values plunged by 23% to $187 billion in the months to September.

While SoftBank shares trade at around a 50% discount, less than a record gap that triggered the launch of an eventual 2.5 trillion yen buyback last year, the conglomerate has the capital to do repurchases now, Son said.

“I am excited because we are discounted to compare to our true strength,” Son said.

Investors have been calling for a buyback to enhance returns. Repurchased shares will be retired, lowering the bar for Son, SoftBank’s top shareholder, launching a management buyout.

“The buyback gives them a crude lever to influence the discount the shares trade at,” said Boody, adding that the more gradual pace may reduce share price volatility.

The future upside for the Vision Fund includes its India portfolio with ride-hailer Ola and logistics firm Delhivery targeting listings.

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

The planned listing of Southeast Asian ride-hailer Grab via a merger with a particular purpose acquisition company will provide further valuation gain, Govil said.

The group’s net loss of 398 billion yen compared to a profit of 628 billion yen a year earlier. Vision Fund’s investment loss totaled 1.167 trillion yen.

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