SoftBank posts $7.6bn profit as its start-ups' valuation rises

A global rally in tech stocks has lifted the value of SoftBank’s stakes in publicly traded tech firms like Uber and other start-ups

SoftBank Group's profit rebounded after a global rally in tech shares helped it improve its start-ups' valuations. AFP

SoftBank Group’s Vision Fund unit posted a record $7.6 billion profit in the second quarter, bolstered by a recovery in some start-up valuations and a blockbuster public offering by a Chinese real estate start-up.

The unit reported 784.4bn yen of income in the three months ended September 30, rebounding from a 612bn yen loss a year earlier, SoftBank said in a statement on Monday. The Tokyo-based company had a net income of 627.5bn yen in the quarter and did not release operating profit figures.

Masayoshi Son’s investment business is recovering from a record loss last fiscal year as a global rally in technology shares lifted the value of SoftBank’s stakes in publicly traded firms like Uber Technologies and improved the prospects for start-ups in its portfolio. But the losses derailed Mr Son’s plans to raise outside money for a follow-up to the original Vision Fund, which disbursed most of its $100bn in capital in under three years. Vision Fund 2 is much 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.

“Vision Fund 2 is showing more discipline,” Atul Goyal, senior analyst at Jefferies, said ahead of the earnings announcement. “But at the end of the day, we need to see some exits and those are probably still years down the road.”

One success in the second fund’s portfolio is KE Holdings, 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 $1.35bn to more than $6.38bn as of September 30, according to Bloomberg calculations. SoftBank said its VF2 had an unrealised gain of 537.2bn yen on KE.

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 yen of assets to reduce debt and fund buybacks. The sell-off included part of its interest in Alibaba Group Holding, T-Mobile US and SoftBank, the Japan telecommunications unit. SoftBank also announced a deal to sell its chip designer Arm to Nvidia for $40bn.

“For long-term SoftBank investors, quarterly earnings are of little import these days,” Jefferies’ Mr Goyal said. “The only thing that’s material is Alibaba’s stock price and the buyback.”

SoftBank has announced a record 2.5tn yen of re-purchases, helping its stock hit a two-decade high last month. Mr 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.