SoftBank’s Vision Fund has recorded its best performance since its launch in 2017 even as the group’s new trading arm racked up losses of $2.7bn from its “Nasdaq whale” trades in the final quarter of 2020.
The Japanese tech conglomerate’s two Vision Funds reported a $13bn gain in the value of their investments during the three months to December, boosted primarily by the rise in holdings of ride-hailing group Uber and DoorDash, the recently listed food delivery group.
The figures released on Monday reflected a dramatic turnround for Masayoshi Son’s group following a turbulent 12 months during which it carried out a huge restructuring of assets alongside aggressive purchases of US equity derivatives using its new cash pile.
For the October to December quarter, SoftBank Group reported a net profit of ¥1.17tn ($11.1bn), up from a ¥55bn profit in the previous quarter and surpassing analyst forecasts of a net profit of ¥98.5bn.
“Investment is rhythm,” Son said, showing a presentation slide of a goose laying golden eggs to the melody of Tchaikovsky’s The Nutcracker March.
“It’s going to be a gold rush as the Vision Fund I enters the harvest phase,” he added, saying he expects about 10 to 20 of start-ups backed by the two funds to go public each year. Among the 131 companies the Vision Funds have invested in, 15 have listed so far.
In addition to the robust market for initial public offerings, Navneet Govil, the Vision Fund’s chief financial officer, also told the Financial Times that the strong performance of its Saudi-backed $100bn fund and its smaller sequel fund was the result of timely exits in market conditions driven by ultra-low interest rates and excess liquidity.
“We believe it’s going to continue,” Govil said, adding that several other IPOs were lined up this year. South Korean ecommerce group Coupang and Chinese ride-hailing company Didi Chuxing are among the Vision Fund investments expected to go public in the near future.
As of the end of December, the fund’s $7.7bn investment in Uber was worth $11.3bn, while its $680m DoorDash investment was valued at $9bn.
Despite the global tech rally that lifted SoftBank’s investments in start-ups, “SB Northstar”, the unit set up to play the market in listed tech stocks, reported derivatives losses of $2.7bn for the October to December quarter, bringing total losses to $5.5bn since September.
The group also made losses from its $22bn investment in US big tech stocks including Amazon, Facebook and Microsoft, but Son said the trades were now generating a profit as of Monday.
Since the FT revealed in September that SoftBank was the mystery “whale” behind a record rally in US tech stocks, the company has decided to unwind its largest equity options trades, facing investor criticism for the high-risk trading strategy.
Shares in SoftBank have risen nearly 240 per cent since their mid-March meltdown, reaching their highest level since the tech bubble in 2000 as investor sentiment toward the Vision Fund improved. On Monday, they were up 4.45 per cent to ¥9,485.
Still, the stock rebound has been overshadowed by SoftBank’s heavy exposure to Alibaba, whose shares have fallen 15 per cent since early November after Beijing halted the $37bn IPO of the Chinese ecommerce company’s online finance affiliate Ant Group.
SoftBank has a 25 per cent holding in Alibaba and the Chinese group still accounts for nearly 60 per cent of the total value of SoftBank’s holdings.
“That company [Alibaba], its valuation and the huge cushion of asset value it represented had become the most solid, dependable bit of SoftBank after the mobile business was separated, and suddenly it doesn’t feel so solid,” said one investor in SoftBank based outside of Japan.
Son said his exchanges with Jack Ma, who has mostly disappeared from public view, have been limited to discussions about how the Alibaba founder has taken up painting as a hobby.
Additional reporting by Leo Lewis in Tokyo