SoftBank posts record Vision Fund profit

The unit posts RM31.2b profit, rebounding from RM24.3b loss a year ago

by BLOOMBERG/ pic by BLOOMBERG

TOKYO • SoftBank Group Corp’s Vision Fund unit posted a record US$7.6 billion (RM31.24 billion) profit in the last quarter, bolstered by a recovery in some start-up valuations and a Chinese real estate start-up’s blockbuster public offering.

The unit reported its biggest income in the three months ended Sept 30, rebounding from a ¥612 billion (RM24.26 billion) loss a year earlier, SoftBank said in a statement yesterday. The Tokyo-based company, which has stopped putting out operating profit figures, had a net income of ¥627.5 billion in the quarter.

Masayoshi Son’s (picture) business is recovering from a record loss last fiscal year as a global rally in technology shares lifted the value of stakes in public firms like Uber Technologies Inc and improved the prospects for start-ups in its portfolio. But the losses derailed Son’s plans to raise outside money for a follow-up to the original Vision Fund.

The second Vision Fund is more modest in scale because it is financed entirely by SoftBank. It has also adopted a more cautious approach, cutting smaller checks at a slower pace.

One success in the second fund’s portfolio is KE Holdings Inc, a Chinese online property platform that went public in August. Shares in the company, also known as Beike, have surged since then, boosting the value of SoftBank’s original US$1.35 billion to more than US$6.38 billion as of Sept 30, according to Bloomberg calculations. SoftBank said its second Vision Fund had an unrealised gain of US$5.1 billion on the investment.

The Vision Fund unit set a new profit record in the quarter, beating the previous high in the third quarter of fiscal 2018, before Uber’s disappointing IPO and the implosion of WeWork’s offering the following year.

After shares plunged in March with the coronavirus outbreak, SoftBank unveiled plans to sell off ¥4.5 trillion of assets to reduce debt and fund buybacks. The sell-off included part of its interest in Alibaba Group Holding Ltd, T-Mobile US Inc and SoftBank Corp, the Japan telecommunications unit. SoftBank also announced a deal to sell its chip designer Arm Ltd to Nvidia Corp for US$40 billion.

SoftBank has announced a record ¥2.5 trillion of re-purchases, helping its stock hit a two-decade high last month. Son also plans to get into the blank-check frenzy and has contemplated a management buyout of SoftBank. He has used some of the proceeds to invest in US tech stocks in what the company described as a liquidity-management strategy. SoftBank acquired ¥1.7 trillion of “highly liquid listed stocks” in the quarter. It held a US$6.3 billion investment in Amazon.com Inc, US$2.2 billion in Facebook Inc and US$1.8 billion in Zoom Video Communications Inc at the end of the period. The operation is managed by its new asset management subsidiary SB Northstar, where Son personally holds a 33% stake.

In September, it was revealed that the investments were accompanied by derivatives that amplified his exposure, causing SoftBank’s market capitalisation to slide by as much as US$17 billion. SoftBank said it had a total of US$2.7 billion of derivatives as of Sept 30. That includes US$4.69 billion of long call options on listed stocks for a notional principal of US$72 billion.

SoftBank yesterday said four of its current directors will leave the board in an effort to increase the proportion of outside directors and improve corporate governance.

Marcelo Claure, COO; Rajeev Misra, head of the Vision Fund; and Katsunori Sago, chief strategy officer, will step down from the board as part of the restructuring. Yasir O Al-Rumayyan, who represented Saudi Arabia’s Public Investment Fund, will also leave the board.

Son said the changes are aimed at separating management and operations at the Japanese conglomerate, which is increasingly focusing on investments rather than managing its own companies. The board will be reduced to nine members with the changes.

“What is SoftBank? It’s a company that invests in the information revolution,” Son said. “That hasn’t changed even for a day since I founded it.”

SoftBank also said chief legal officer Robert Townsend is leaving the company this month. The former co-chair of Morrison & Foerster’s Global M&A Practice Group joined SoftBank in August 2018 to head its legal, compliance operations and corporate governance operations.

Tim Mackey, who has served as deputy general counsel since November 2018, will take over from Townsend. — Bloomberg