SoftBank’s Vision Fund Posts $ 2 Billion Profit, Stock Weakness Throws Shadow

TOKYO, Aug. 10 (Reuters) – The Vision Fund unit of SoftBank Group Corp (9984.T) posted a first-quarter profit of 236 billion yen ($ 2.14 billion) on Tuesday, the gains from the listing of portfolio companies having been offset by lower shares of companies like e-retailer Coupang Inc.

The Japanese conglomerate posted a record annual profit in May, with executives pointing the finger at Vision Fund investments such as Chinese ridesharing company Didi Global Inc (DIDI.N) and “Uber for trucks” startup Full Truck Alliance Co Ltd (YMM.N).

These New York-listed companies during the quarter, but Chinese regulatory measures subsequently hammered valuations, underscoring SoftBank’s Chinese risk even as the group seeks to reduce its reliance on its largest asset, a stake in Chinese e-commerce giant Alibaba Group Holding Ltd (9988. HK).

The change cooled SoftBank’s investments in China, which make up about a quarter of its fund portfolio.

“Until the situation becomes clearer, we want to wait and see,” said Masayoshi Son, Managing Director of SoftBank.

“In a year or two, I think new rules will create a new situation.”

Although the crackdown has affected performance expectations, “Our larger thesis in China remains unchanged: this is still a significant, growing and compelling economic opportunity,” said Navneet Govil, CFO of Vision Fund.

The turmoil is clouding the outlook for the group, whose shares have fallen by a third from two-decade highs in March as part of the completion of a record 2.5 trillion yen buyout. Shares closed 0.9% higher ahead of earnings.

“Having a large public portfolio introduces volatility, but at the same time it allows us to continue to monetize in a very disciplined manner,” said Govil.

Weak stock prices and analysts’ speculation on the short side have raised expectations that a buyout is imminent.

“So far we have sold assets and announced a buyout. This time there has been no such event,” Son said.

Considering the spread between the group’s share price and the value of its assets, he added, “I guess we’ll do a buyback someday. The timing and size are things we look at on a daily basis. “

REVERSE VISION FUND

More than two-thirds of the first $ 100 billion Vision fund’s portfolio is listed or released. SoftBank has distributed $ 27 billion to its sponsors since its inception.

Further benefits will come from announcements by Indian payments company Paytm and insurance aggregator Policybazaar as well as Southeast Asian ridesharing Grab, which is expected to be made public via a business merger by check in white, Govil said.

SoftBank is also stepping up its investments through Vision Fund 2, in which it has committed $ 40 billion in capital, with the unit making 47 new investments worth $ 14.2 billion in the April-June quarter alone.

Son said he would invest in the second fund through a program using his SoftBank shares as collateral.

In the first quarter, the Vision Fund’s unit gains included 310 billion yen from the sale of shares in investments such as delivery company DoorDash Inc (DASH.N) and ridehailer Uber Technologies Inc (UBER.N).

However, the group’s first-quarter net profit fell 39% to 762 billion yen.

SoftBank has also bet on publicly traded stocks through its trading unit SB Northstar.

It had stakes in companies worth $ 13.6 billion at the end of June, with the portfolio no longer including Microsoft Corp (MSFT.O) or Facebook Inc (FB.O) listed three months earlier.

Unit will decrease as SoftBank prioritizes the Vision Fund, Son said.

($ 1 = 110.3900 yen)

Reporting by Sam Nussey; Editing by Christopher Cushing and Clarence Fernandez

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