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Since Masayoshi Son, founder of SoftBank, launched its $ 100 billion vision fund in 2017, the business community is focused on outflows: billions have been allocated to companies ranging from Grab, the Singapore car service , at WeWork, the shared office provider in the United States.
Mr. Son's critical view as an opportunistic and even whimsical investor has been confiding new ammunition last week after revealing that he had lost $ 130 million from his Personal fortune on a bitcoin investment and paid 900 million euros of SoftBank funds to Wirecard, the German payment group fighting an accounting scandal.
But money is also starting to flow in the other direction. Armed liquidity derived from the $ 23.5 billion SoftBank mobile unit rating and the largest sale of Japan corporate bonds to retail investors, and the introduction On the Uber Stock Exchange, Mr. Son finally begins to dispel the idea that his Japanese technology conglomerate is risky – addicted and in debt. Mr. Son has so much impression that he launched a $ 5.5 billion stock buyback in February.
"Until now, SoftBank was considered a debt-laden group and doing dangerous things," Son said in February. "Over time, all this noise will disappear."
Mr. Son has always complained that investors do not appreciate the real value of the group. In February, when his market capitalization rose to 9 billion yen ($ 80 billion), he argued that SoftBank's stock was dumped by nearly 60%. According to his calculations, the company's net debt was 3.6 billion yen and its portfolio of assets, including Alibaba, WeWork and Uber, of 25,000,000 yen, which implied a value of 21,000 yen for shareholders.
Now, more and more investors are starting to rally to him.
Since the IPO on December 19 of the shares of its mobile subsidiary, the shares of the SoftBank Group have increased by 41%, reaching their highest level in 19 years.
The cost of five-year credit default swaps against SoftBank's non-payment of debt has fallen by almost 100 basis points since the beginning of the year, to 170 basis points, according to reports. Bloomberg data, after rising sharply after the murder of journalist Jamal Khashoggi expressed concern over the group's ties with Saudi Arabia.
Richard Kaye, portfolio manager at the French asset manager Comgest, shareholder of SoftBank with a $ 50 million stake, said that events including the creation of the SoftBank mobile unit and the deposit A public takeover bid by Uber, of which SoftBank is the main shareholder, gave investors confidence in the Japanese group's ability to monetize its assets.
"This could be the beginning of a fairly long reassessment of SoftBank's potential by investors," said Kaye.
The $ 4.5 billion bond issue of Japanese home investors this month was fully subscribed on the first day, although SoftBank still ranks below investment grade by Moody & # 39; s and S & P
Given the 1.64% coupon, well above the country's near-zero interest rates, analysts said the scale of the retail demand was not unexpected, but still impressive given that SoftBank had already sold more than $ 40 billion worth of bonds to individual investors.
However, a sign of lingering investor concern, SoftBank shares fell 3.6% at the end of last week after US Department of Justice antitrust staff objected to a merger between T-Mobile and US mobile phone provider SoftBank, Sprint.
Despite the recent recovery, SoftBank's shares remain dumped by 40%, which is in line with Son's parameters. According to investors and analysts, the IPO planned by Uber in early May, in which the US mobile group seeks to raise up to $ 9 billion, could prove crucial.
SoftBank, which has invested $ 7.7 billion for a 16.3% stake in Uber through the Vision Fund, could be awarded a stake of nearly $ 11 billion if the US group achieves its expected valuation of 91%. , $ 5 billion in IPO. Deposits show that he can also sell about $ 272 million of shares to the IPO if the demand is sufficient.
But if SoftBank decides to sell a larger portion of its stake in Uber after the 180-day lock-in period, it is unclear whether these gains would be used to make new technology bets, pay off a debt, or reinstate money to shareholders.
"As SoftBank is the kind of company that can aggressively make new investments, possibly through Vision Fund II, we would like to know how it will use this cash," said Motoki Yanase, Vice President and Senior Credit Officer of Moody.
"Vision Fund's investments have gone well so far, but there is no guarantee that these investments in volatile Internet companies will continue," said Yanase.
The Vision Fund contributed 40% of SoftBank's operating profit in the last quarter, but this is essentially unrealized gains that are not recorded in the group's books. If Uber's IPO is followed by others, such as its Chinese rivals Didi Chuxing and Slack, the desktop messaging application, SoftBank, will have more money.
"The biggest problem SoftBank faces is how they can ensure stable cash flow because their investments will continue to grow," said Satoru Kikuchi, an analyst at SMBC Nikko Securities. Alibaba and Sprint do not generate dividends and its mobile cash cow unit will likely generate only half of the cash it usually used following listing.
The SoftBank Vision Fund is also heavily indebted, with an unconventional structure in which 40% of its capital is preferred securities that pay an annual coupon of 7%. Analysts warn that this configuration exacerbates SoftBank's need to fund the repayment of its debt and the risk that the company will have to deploy its own capital if the fund runs out of liquidity.
Yoshimitsu Goto, Chief Financial Officer of SoftBank, said his concern over the group's 17 billion yen interest-bearing debt was overstated, pointing out that the company still had enough cash to cover two-year maturities. of his debt.
He added that his net debt had fallen to 3.6 billion yen, adding such liquidity and removing debt from its subsidiaries such as Sprint and its mobile unit, for which SoftBank is not responsible in case of failure.
While this may be technically true, any indication that its subsidiaries have difficulty repaying their debts would have an impact on SoftBank's solvency and borrowing costs.
Atul Goyal, an analyst at Jefferies, warned: "When the recession occurs, SoftBank's shares will suffer, investors will be confronted with heavily indebted balance sheets and the value of its beneficiary companies falling sharply."
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