SoftBank: more buybacks and less investing the answer for Son

A couple of months back Masayoshi Son asked his top team at SoftBank to slow their investment plans. No wonder. On Thursday, the Japanese technology investment group logged a record annual loss at its Vision Fund unit after technology shares worldwide collapsed. SoftBank founder Son, ever the optimist, nevertheless maintains the group deserves a higher valuation.

SoftBank’s annual net loss totalled ¥1.7tn ($13bn), while its Vision Fund unit posted an investment loss of ¥3.5tn ($27bn) for the year to March. This marked the biggest annual loss for the group since Son shifted from telecoms to tech investment. An 80 per cent plunge in shares of South Korean ecommerce platform Coupang — of which SoftBank is the largest shareholder — since it listed last year, as well as a mark down on some of its unlisted asset valuations all played a part.

Son deserves some credit for his effort at diversifying away from China as crackdowns intensified, down to around a tenth by portfolio worth. Part of that reduction is simply due to plummeting market valuations there.

SoftBank now also has a cash position of $23bn and $50bn in capital for investments. Despite the loss from its Vision Fund, SoftBank still managed to complete a record number of public listings and divestments of its portfolio companies last year.

Markets sensed what was coming. Its shares started falling well before results, down 8 per cent on Thursday alone. SoftBank has large exposure to the US equity sell-off as 43 per cent of its portfolio sits in the Americas. It also remains exposed to Chinese regulatory risk. E-commerce conglomerate Alibaba — whose shares have fallen two-thirds in the past year — still represents 22 per cent of its net asset value.

That partly explains why SoftBank’s current $60bn market value is less than half the $150bn which is the group’s net asset value.

Where Son sees value, investors perceive risk. Shares are down 47 per cent in the past year. Any meaningful rise in the stock price over the past two years has resulted from buybacks. Son would do well to continue his investing pause, and instead put money into those apparently cheap SoftBank shares.