The Softbank founder is withdrawing from the investment business.
(Photo: Reuters)
Tokyo Masayoshi Son started the quarterly presentation of his Softbank group on Friday with a bang: The Japanese billionaire is handing over operational management of the investment business, which has invested well over 100 billion euros in over 400 mega start-ups over the past five years, to his chief financial officer Yoshimitsu Goto.
Due to the global price slump in technology stocks, Softbank is recording high book losses on its portfolio. Softbank has therefore switched from investing to being defensive, said Son. Given inflation and rising interest rates, he does not expect a quick turnaround either. Now he lets Goto take the helm. “He’s better on the defensive than I am,” the 64-year-old founder explained his decision.
Instead, he wants to focus on his British chip designer ARM, Apple’s chip partner, which Son plans to list. “That will be the source of my happiness, energy and excitement,” Son said. “And I believe that’s what’s best for Softbank as well.”
New U-turn for Softbank
Son’s partial withdrawal points to the next major upheaval for Softbank. Shortly after founding and starting his work as a software dealer, Son developed his company into a hybrid of a technology company and an investor. In 2016, he then fully supported his investor side with the founding of the first Vision Fund. In addition to his own money, he raised almost 100 billion dollars from Arab sovereign wealth funds and global corporations such as Apple.
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He quickly invested the capital in unicorns, as start-ups with a market value of more than one billion dollars are called. These included transport service providers such as Uber or the office provider Wework. A second vision fund and a third fund for Latin America soon followed.
But after strong years, business began to weaken in 2019 and fell into an initial crisis with the Corona price crash. Softbank freed itself by selling shares. He now made up for the current price slide with the same recipe.
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In the first quarter, Softbank wrote a net loss of around 22 billion euros due to huge book losses on the portfolio. The book losses in September of the past second quarter still amounted to almost ten billion euros. But through share sales, Softbank made a bottom line profit of 21.2 billion euros. In the first half of the year, Softbank only posted a loss of 900 million euros.
Son downsizes China stocks
The majority of the proceeds, equivalent to 32.8 billion euros, came from the sale of shares in the Chinese online trading platform Alibaba, which had been the pillar of Softbank’s fortune for more than ten years. Thus, Alibaba’s share of Softbank’s value has shrunk from 23 to 15 percent in the past six months.
In addition, Softbank is reducing its previously strong exposure to China. Because the regulation of tech companies, the new emphasis on state-owned companies, a real estate crisis and corona lockdowns are slowing down the economy and depressing prices.
With the proceeds, Softbank not only bought back bonds worth 16.6 billion euros, but also shares worth 9.8 billion euros in the past twelve months. The group has recently successfully boosted its own course.
ARM IPO comes into focus
At the same time, Softbank reduced investments in new start-ups from around 14 billion euros in the same period last year to 300 million euros in the past quarter. There is no investment ban behind this, CFO Goto made clear. One is prepared to invest if the management considers the valuation of the company to be appropriate. In principle, however, the Group is gearing up for a prolonged phase of weakness on the financial markets.
The management of the portfolio is meanwhile distributed to a new management team. Founder Son remains as CEO, but wants to be more of an entrepreneur again. ARM is particularly important to him. Because he sees in the British chip designer the potential to determine the semiconductor market of the future with his architecture.
He never wanted to sell ARM, he said on Friday. It was therefore only a minor setback for him when a sale to the graphics card manufacturer Nvidia failed due to resistance from the antitrust authorities.
Now he wants to make the company ready for the future and an IPO. In view of the current situation on the stock market, however, this is unlikely in the fiscal year running until March, said a Softbank manager. “But we are fully behind an IPO in 2023.”
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