Softbank Q3 profit falls 99%, pulled down by Vision Fund
TOKYO: Quarterly profit at Softbank Group Corp. was almost wiped out as the Japanese technology giant was hit for a second straight quarter by losses at its $100 billion Vision Fund.
The company’s third-quarter operating profit fell 99%, well short of analyst estimates.
Wednesday’s dismal results could further dampen investor enthusiasm for founder Masayoshi Son’s big bets on untested start-ups. While Son told a news conference Softbank had turned a corner, he also said he has been forced to scale back a second Vision Fund while investing with only Softbank’s own capital.
That marks a major climbdown from July, when Softbank said it had attracted $108 billion in pledges for a second mega-fund.
More pointedly, it shows how the bailout of start-up Wework last year and other missteps have put a chill on the tech investing scene and given Softbank shareholder Elliott ammunition to lobby for change.
“We have caused a lot of concern,” Son said in Tokyo following the results, adding he needs to “give everyone piece of mind” to secure outside funds for Vision Fund 2.
Group profit was 2.6 billion yen ($24 million) in the October-december quarter versus 438 billion yen a year before. The Vision Fund posted an operating loss of 225 billion yen ($2.05 billion) for the quarter compared with a 176 billion yen profit in the same period a year earlier.
But Son, known for an ebullience and charisma that is still rare in corporate Japan, said the company’s performance was already improving.
“The tide is turning,” he said.
BIG STAKE
“Softbank should focus on one thing, shareholder value creation,” said Jeffries analyst Atul Goyal in a note ahead of results.
Son pointed to a rally in prices at the Vision Fund’s handful of listed investments and news overnight that a US federal judge had rejected an antitrust challenge to the proposed merger of Softbank’s Sprint Corp and T-mobile US Inc.
Shares of Softbank finished up 12% in Tokyo before the results and after the US court decision.
Son has long argued Softbank’s shares are undervalued, a position shared by US hedge fund Elliott Management, which has recently emerged as a prominent shareholder. Elliott, one of the world’s best known activist investors, is pushing for changes including $20 billion in stock buybacks, sources said last week.
Softbank has held discussions with Elliott and is aligned on improving shareholder value, Son said, adding that while open to potentially buying back shares, he was in “no hurry” to sell part of a 26% shareholding in Alibaba to fund buybacks.
Meanwhile, big investors who are critical to Softbank’s plans for a second massive technology investment fund are refusing to take part unless the first $100 billion Vision Fund can turn around its performance, people familiar with the talks told Reuters.