Japan’s SoftBank Group announced a profit of $ 17.7 billion in the fourth quarter of the fiscal year ending in March 2021, setting a new record thanks to unprecedented profits resulting from its investment activity. The group’s net income reached 1.93 trillion yen for the same period, according to a disclosure statement issued by “SoftBank” on Wednesday.
SoftBank’s fourth-quarter net income was the highest on a quarterly basis for a listed Japanese company, since 1990, according to data compiled by Bloomberg.
Most of the net income has flowed from Ruya Fund, the group’s investment arm, generating more than 2.3 trillion yen in profit, mainly through the successful initial public offering of Coupang, South Korea’s leading e-commerce company, in March.
Thanks to deals like this, the investment business of Japanese group CEO Masayoshi Son has shifted from being the source of the largest loss in SoftBank history just a year ago, to the main engine of profit growth.
The global rise in technology stocks led to an increase in the profits of the “Vision” fund, to record new records for three consecutive quarters, which raised the value of its holdings in companies such as Uber Technologies Inc, and paved the way for public offering shares such as: “Kubang” And DoorDash Inc., a US food delivery service.
At the same time, Sun spent more than $ 20 billion to buy back SoftBank shares (treasury shares), which helped push the company’s share price to its highest level in 20 years.
“Investors want to know if the returns are coming,” said Kirk Boudry, an analyst at Redex Research in Tokyo, before the earnings were announced.
“Vision Fund” can contact, and whether they can get more share buybacks.
SoftBank said in the statement that the South Korean Kupang Company contributed $ 24.5 billion to the “Vision” fund in the fourth quarter of the fiscal year 2020/2021.
Cobanee’s $ 4.6 billion initial public offering (IPO) was the second largest since the beginning of 2021, and represented the best return for the Sun affiliate since the listing of the Alibaba Group in 2014.
Auto1 Group SE, a German used car wholesaler that went public in February 2021, contributed $ 1.8 billion in gains, while Uber posted a $ 200 million loss. SoftBank’s total portfolio through its “Vision” funds totaled 125 companies at the end of March.
The Japanese group does not have to sell its equity holdings to record an income, so most of its profits are unrealized. SoftBank exited 11 investments during the past fiscal year, recording realized gains of $ 4 billion, and raised the capital associated with its Vision 2 fund to $ 30 billion, from $ 20 billion.
In his previous February earnings announcement report, Sun said, SoftBank could see 10 to 20 IPOs per year. Crow Holdings plans to offer its shares for an IPO in the United States by July, through its largest-ever merger with Blank Check, or a special-purpose acquisition, which raises the value of the transportation and delivery giant in Southeast Asia to $ 40 billion. .
Its Chinese counterpart, Didi Chuxing, has submitted an IPO application to the US Securities and Exchange Commission, which could value the company between $ 70 billion and $ 100 billion.
Bodry said, “Son needs to convince investors that the markets will hold up, and that SoftBank officials will be able to continue this pace of listing their companies through the IPO … Public valuations have dropped very significantly, and this is a big problem for SoftBank.”
The good news has disappeared
Kubang has lost more than $ 20 billion in market value since the beginning of the current quarter, while Uber has lost nearly $ 15 billion.
The decline in the valuation of the Chinese real estate platform “KE Holdings Inc.”, by about $ 10 billion – which went public in August 2020 – helped the “vision” fund to set a new record for profits in that quarter, while the valuation of the company decreased. Doordash “is worth more than 1.5 billion dollars.
“The problem facing SoftBank is that the good news is already disappearing,” said Atul Goyal, a senior analyst at US investment bank Jefferies, before the earnings were announced.
He added, “What is less clear is the potential losses in preferred public equity investments and derivatives..the negatives are somewhat vague, and this is what investors look for during profits.”
Sun’s controversial trading options program was a source of costs for the quarter ending at the end of March, and the company reported derivatives losses of 33 billion yen in the same period. While the asset management division totaled 46 billion yen in profit for that period, the company was still posting a full-year loss of 67 billion yen.
SoftBank owns $ 19.9 billion in “highly liquid” securities at the end of the quarter, including investments of $ 6.2 billion in “Amazon”, $ 3.2 billion in “Facebook”, and $ billion in “Microsoft.” “.
The investments are managed by Softbank subsidiary SB Northstar, with Sun owns 33% of the shares personally.
Investments included dealing with financial derivatives, which led to increased exposure, a strategy that led to a backlash by investors.
The fair value of futures and options positions for SoftBank was $ 1.6 billion at the end of March, compared to just over $ 1 billion in the quarter ended December 2020, and $ 2.7 billion at the end of the quarter ended September 2020.
Stock options contracts dwindled to $ 1.6 billion in the fourth quarter from $ 4.69 billion half a year ago, and call options contracts in listed shares fell to $ 84 million from $ 1.26 billion.