By Sam Nussey
When the Japanese conglomerate posted record annual profit in May executives pointed to further upside from Vision Fund investments such as Chinese ride-hailing firm Didi Global Inc and “Uber for trucks” startup Full Truck Alliance Co Ltd.
Those companies listed in New York but Chinese regulatory action has subsequently hammered valuations, underscoring SoftBank’s China risk even as the group seeks to reduce dependence on its largest asset, a stake in Chinese e-commerce giant Alibaba Group Holding Ltd.
The shift has cast a chill on SoftBank’s investing in China, which makes up about a quarter of its funds’ portfolio.
While the crackdown has affected returns expectations, “our broader thesis in China is unchanged: It’s still a large, growing and compelling economic opportunity,” said Navneet Govil, the chief financial officer of Vision Fund.
The Vision Fund unit on Tuesday posted a first quarter profit of 236 billion yen ($2.14 billion) as gains from listings were offset by falling shares in firms like South Korean e-retailer Coupang Inc.
The China turmoil is clouding the outlook for the group, shares of which have slipped a third from two-decade highs in March amid the completion of a record 2.5 trillion yen buyback. Shares closed up 0.9% ahead of earnings.
“Having a large public portfolio introduces volatility but at the same time it allows us to continue to monetise in a very disciplined manner,” said Govil.
Share price weakness and sell-side analyst speculation have driven expectation that a buyback may be imminent.
“Until now we have sold assets and announced a buyback. This time there was no event like that,” Son said.
Given the gap between the group’s share price and the value of its assets, he added, “I guess we will do a buyback sometime. The timing and size is something we consider daily.”
VISION FUND UPSIDE
More than two-thirds of the portfolio of the first $100 billion Vision Fund is listed or exited. SoftBank has distributed $27 billion to its limited partners since inception.
Further upside will come from listings by Indian payments firm Paytm and insurance aggregator Policybazaar as well as southeast Asian ridehailer Grab, which is due go public via a blank-cheque company merger, Govil said.
SoftBank is also ramping up investing through Vision Fund 2, to which it has committed $40 billion of capital, with the unit making 47 new investments worth $14.2 billion in the April-June quarter alone.
Son said he would invest in the second fund through a scheme using his SoftBank shares as collateral.
In its first quarter, Vision Fund unit gains included 310 billion yen from selling shares in investments such as delivery firm DoorDash Inc and ridehailer Uber Technologies Inc.
However, group net profit fell 39% to 762 billion yen.
SoftBank has also been betting on publicly listed shares through its SB Northstar trading unit.
It held stakes in firms worth $13.6 billion at the end of June with the portfolio no longer including Microsoft Corp or Facebook Inc listed three months earlier.
The unit will shrink as SoftBank prioritises the Vision Fund, Son said.
(Reporting by Sam Nussey; Editing by Christopher Cushing and Clarence Fernandez and Kirsten Donovan)