SoftBank shares fall as value of portfolio companies plummets

SoftBank Group shares fell 8 per cent on Monday, their seventh consecutive day of losses, as mounting problems at its portfolio companies Didi Chuxing and Arm revived concerns over the Japanese technology conglomerate’s business model.

SoftBank’s share losses were part of a broader regional sell-off of tech-related shares in Asia on Monday. Alibaba, the ecommerce company founded by Jack Ma and the most valuable of SoftBank’s investments, dropped 6.4 per cent.

SoftBank shares fell as low as ¥5,057 ($45) during the morning trading session in Tokyo, touching their lowest level since June 2020. Investors said that last week’s announcement by Chinese ride-hailing company Didi that it had begun the process of delisting its shares from the New York Stock Exchange had been especially chilling.

While high valuations for tech companies are also readily achievable on the Hong Kong exchange, where Didi plans to relist, SoftBank investors have come to expect a business model in which the Japanese company seeks share sales in the US for the highest possible valuations for its portfolio companies.

Traders and fund managers said that the protracted drop in SoftBank’s share price, which has lopped more than a quarter of the value off billionaire Masayoshi Son’s group since mid-November, was likely to revive short-term speculation — and potential shareholder pressure — for a huge stock buyback.

Last month, Son appeared to bow to investor pressure, promising an $8.8bn share buyback over the next 12 months as the group’s Vision Fund reported a record quarterly loss.

On its corporate website, SoftBank prominently publishes a calculator of the company’s net asset value per share — a figure that has historically reflected a significant “conglomerate discount” that has long been a source of frustration to Son. As of Monday morning, SoftBank was trading at more than a 50 per cent discount to its October 1 NAV.

Richard Kaye, a portfolio manager at Comgest and a long-term SoftBank shareholder said: “There is a huge conglomerate discount and the debate about buybacks will get louder on a day like today.”

“But from what the company has said, I think SoftBank would rather spend on other projects with even higher returns than are achieved by buying its own stock. I do not think SoftBank will feel hurried into anything,” he added.

Compounding the pressure on the Japanese group was the filing of a lawsuit last Thursday by the US Federal Trade Commission to block the acquisition by graphics processor group Nvidia of SoftBank Group-owned UK chip designer Arm. The envisaged deal was for up to $40bn in cash and stock.

The US regulator argued in a statement that the deal would allow the combined firm “to stifle competing next-generation technologies”. Analysts covering SoftBank said that the company had likely been well prepared for the possibility of the FTC’s move.