SoftBank Group’s quarterly profit wiped out by Vision Fund losses

Japan’s SoftBank Group Corp said on Wednesday its third-quarter operating profit fell 99%, well short of analyst estimates, pulled down by a second …

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.

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 to clients ahead of the earnings.

Son pointed to a rally in prices at the Vision Fund’s handful of listed investments and news overnight that a U.S. 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 U.S. court decision.

Son has long argued SoftBank’s shares are undervalued, a position shared by U.S. 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.

The Vision Fund, which is backed by Saudi Arabia and has single-handedly changed the face of tech investing, said it had invested $74.6 billion in 88 companies as at the end of December, when those investments were worth $79.8 billion.

Analysts have said it is difficult to evaluate SoftBank’s performance due to a lack of disclosure around Vision Fund’s internal valuations.

Son’s investing credentials took a hit in the August-September quarter when the Vision Fund recorded an $8.9 billion operating loss.

Since then, a slew of portfolio companies – from hotel-booking platform Oyo to cloud robotics firm CloudMinds – have cut jobs and come under pressure to demonstrate the long-term viability of their business models.

The fund itself has also lost key employees.

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Google challenges €2.4bn antitrust fine in court / SoftBank Group posts Q3 earnings / European …

Good morning, here’s your Wednesday morning briefing. Look out for these three things happening around the world today.
3 THINGS THAT WILL CHANGE THE WORLD TODAY

Good morning, here’s your Wednesday morning briefing. Look out for these three things happening around the world today.

Google challenges €2.42bn antitrust fine in court hearing

A three-day hearing gets underway for Google’s challenge of a €2.42bn antitrust fine issued by the European Commission in 2017.

Three years ago the commission said the search engine giant was guilty of using its market dominance to predominantly display Google Shopping results.

While Google is complying in part, it argues that the EU did not show enough evidence that proved Google Shopping hurt rivals.

Google has since been stung by two more EU anti-trust fines. In 2018 it was fined a record €4.3bn for abusing its market dominance in mobile. In 2019 it was hit with a €1.5bn antitrust fine for abusing its dominant position in online search advertising.

SoftBank Group posts Q3 earnings

Japan’s SoftBank Group is due to post its third-quarter results for the fiscal year ending 31 March 2020.

The multinational conglomerate, which is known for investing in technology firms via its Vision Fund, publishes its results as this newsletter goes live, between 7am and 8:30am GMT. A livestream of the conference call can be viewed here.

SoftBank is a majority shareholder in embattled office sharing group WeWork. Following WeWork’s disastrous IPO last August, SoftBank was forced to bail out the startup with a $9.5bn cash injection.

The Tokyo Stock Exchange-listed firm reported its first quarterly loss in 14 years in July-September 2019.

European Information Security Summit

The European Information Security Summit gets underway in London, UK.

Organised by cybersecurity publication teiss, the two-day event will see over 100 speakers from around the world take part in panel sessions, roundtables and workshops.

The focus this year is on the key themes and challenges faced by CISOs, CIOs, CTOs and heads of information security.

3 Things That Will Change the World Today

Get the Verdict morning email

Speakers include the CISO of Penguin Random House UK, the chief security officer at Network Rail and a Google cloud specialist.

Monday’s Highlights

---

MWC coronavirus cancellations: The companies that have withdrawn so far

On Safer Internet Day, online incivility is at a four-year high

Impala raises $20m to expand hotel API platform

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SoftBank’s profit drop amid WeWork worries, Sprint approval

TOKYO – Japanese technology conglomerate SoftBank Group Corp. said its profit for last quarter dropped amid worries about the perceived risk of its …

TOKYO – Japanese technology conglomerate SoftBank Group Corp. said its profit for the last quarter dropped amid worries about the perceived risk of its investments into companies like WeWork.

Tokyo-based SoftBank said Wednesday its profit for the October-December quarter stood at 55 billion yen ($500 million), down to less than a tenth of the 698 billion it earned over the three months in 2018.

In a bit of good news, a U.S. judge in New York on Tuesday rejected a challenge by a group of states to T-Mobile’s $26.5 billion takeover of Sprint. SoftBank owns Sprint.

The deal has been two years in the making, and the latest development appears to clear nearly all the hurdles. The agreement already has U.S. regulatory approval and the go-ahead from public utility commissions. T-Mobile now expects to close the deal as early as April 1.

The good news sent SoftBank shares soaring in Tokyo trading.

SoftBank, which includes in its group a successful Japanese mobile carrier, reported quarterly sales edged down 3% to 2.44 trillion yen ($22 billion).

Losses at SoftBank’s investment fund called the Vision Fund also hurt results , although such losses have been decreasing.

The reputation of the Vision Fund, which was started mostly with Saudi money, suffered in 2018, after the killing of Saudi journalist Jamal Khashoggi. The fund has been investing in various companies, solar projects and artificial intelligence.

Adding to the company’s challenges has been SoftBank’s bailout of WeWork last year. That invited scrutiny after WeWork, which bills itself as both a technology and real-estate company, canceled an initial public offering.

SoftBank brought in new leadership at WeWork to try to engineer a turnaround. The company says it’s banking on the huge potential of workspace sharing around the world, and has secured enough cash to move forward.

SoftBank has powerful companies under its wing, including Alibaba, a Chinese e-commerce, retail and net conglomerate, Yahoo! Japan and the British IOT company Arm.

SoftBank’s founder and Chief Executive Masayoshi Son has managed to score success by jumping from what he sees as one lucrative venture to another, a business style that’s common in the West but relatively rare in conservative Japan Inc.

“I see comments out there that SoftBank even might go bankrupt. But we are in the black. It is a far cry from bankruptcy,” he told reporters and analysts at a Tokyo hotel, noting shareholders’ value had increased by 5 trillion yen ($45 billion) in the past four months.

Son showed a trompe-l’œil image that looks like a duck from the right but a rabbit when looked at from the left, while acknowledging he was making “a pretty outlandish argument” to have people focus on shareholders’ value, not profits.

Among SoftBank’s sprawling businesses are ride-sharing Uber and the talking Pepper humanoid.

___

Yuri Kageyama is on Twitter at https://twitter.com/yurikageyama

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SoftBank Group quarterly profit wiped out by Vision Fund losses

TOKYO (Reuters) – Japan’s SoftBank Group Corp said on Wednesday its third-quarter operating profit fell 99%, well short of analyst estimates, pulled …

TOKYO (Reuters) – Quarterly profit at SoftBank Group Corp (9983.T) was almost wiped out as the Japanese technology giant was hit for a second straight quarter by losses at its $100 billion Vision Fund.

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 to clients ahead of the earnings.

Son pointed to a rally in prices at the Vision Fund’s handful of listed investments and news overnight that a U.S. federal judge had rejected an antitrust challenge to the proposed merger of SoftBank’s Sprint Corp (S.N) and T-Mobile US Inc (TMUS.O).

Shares of SoftBank finished up 12% in Tokyo before the results and after the U.S. court decision.

Son has long argued SoftBank’s shares are undervalued, a position shared by U.S. 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 (BABA.N) to fund buybacks.

The Vision Fund, which is backed by Saudi Arabia and has single-handedly changed the face of tech investing, said it had invested $74.6 billion in 88 companies as at the end of December, when those investments were worth $79.8 billion.

Analysts have said it is difficult to evaluate SoftBank’s performance due to a lack of disclosure around Vision Fund’s internal valuations.

Son’s investing credentials took a hit in the August-September quarter when the Vision Fund recorded an $8.9 billion operating loss.

Since then, a slew of portfolio companies – from hotel-booking platform Oyo to cloud robotics firm CloudMinds – have cut jobs and come under pressure to demonstrate the long-term viability of their business models.

FILE PHOTO: The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017. REUTERS/Issei Kato/File Photo

The fund itself has also lost key employees.

($1 = 109.9900 yen)

Reporting by Sam Nussey; Editing by Christopher Cushing, David Dolan and Mark Potter

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SoftBank Group nine-month net profit down nearly 70 pct

Major Japanese technology investor SoftBank Group said Wednesday its net profit plunged nearly 70 percent for the nine months to December as …

Major Japanese technology investor SoftBank Group said Wednesday its net profit plunged nearly 70 percent for the nine months to December as investments in share companies such as WeWork and Uber took a hit.

Its bottom-line profit lost 69.0 percent to 476.6 billion yen ($4.3 billion) for the period as the firm suffered an operating loss of 13.0 billion yen.

The operating loss was largely “due to a decrease in the fair values of investments including Uber and WeWork and its three affiliates,” the company said in a statement.

The company did not publish its outlook for the year to March 2020.

The disappointing results follow a turbulent period for the firm and CEO Masayoshi Son has faced criticism over his commitment to start-ups some say are overvalued and lack clear profit models.

SoftBank has taken stakes in some of Silicon Valley’s hottest start-ups through its $100 billion Vision Fund.

The group last year announced its long-mooted Vision Fund 2, again targeting around $100 billion, but investors have been slower to commit this time around.

In the second quarter to September, the group reported an operating loss of 704.4 billion yen, the worst in its history.

But it returned to the black for the three months to December, reporting 2.6 billion yen in operating profit, still down from 438.3 billion yen a year earlier.

Shares in SoftBank have risen recently on news US hedge fund Elliott Management has built a more-than-$2.5 billion stake in the group.

On Wednesday, stocks rose another 11.88 percent after news that the T-Mobile and Sprint merger had been approved — more than two years after it was first announced.

The merger reduces the risk that SoftBank will need to fund its unit Sprint, which will help improve the parent firm’s balance sheet, analysts said.

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