(Bloomberg) — Masayoshi Son said his SoftBank Group Corp. will buy back as much as 1 trillion yen ($8.8 billion) of its stock after a decline in the value of its portfolio companies led to a record loss in its Vision Fund investment unit.
The Tokyo-based company said Monday it would repurchase up to 14.6% of its outstanding stock and retire the shares in a program that will run for a year. Son said that if the buyback isn’t completed in the next year, it could be extended.
“We had a heated discussion at the board meeting. We decided now is the time to buy back shares,” Son said at an investor presentation after the earnings announcement. “I am so excited, because I am a shareholder.”
The SoftBank founder is returning to a familiar strategy after an unprecedented 2.5 trillion yen buyback program last year helped more than triple the company’s valuation from its pandemic low. The company’s shares have slid more than 40% from their peak in mid-March after the repurchase program ran out.
SoftBank has struggled to prop up its stock without buybacks, especially as a crackdown in China weighed on the valuations of several key portfolio companies. Its most valuable holding is Alibaba Group Holding Ltd., one of the primary targets of Beijing’s regulations. It also holds a stake in Didi Global Inc., the ride-hailing giant that also has been under regulatory attack.
Son said that SoftBank’s shares now trade at a 52% discount to the value of its holdings.
“With a discount this wide, I thought, what would make shareholders happy? A buyback,” he said.
The move is likely to boost its share price and please investors.
“We are pleasantly surprised, but our enthusiasm is slightly tempered by the conditions Son has put on it,” said Kirk Boodry, an analyst at Redex Research in Tokyo. “It is a sizable buyback, but saying that it might take more than a year indicates the pace will be a lot slower compared to their previous program.”
SoftBank reported a record loss at its Vision Fund unit for the fiscal second quarter because of a decline in the value of public holdings, including Didi and the Korean e-commerce giant Coupang Inc. The investment arm lost 825.1 billion yen, while the company overall reported a second-quarter net loss of 397.9 billion yen.
Son’s Vision Fund has been a volatile contributor of profit and loss since its creation in 2017. The unrealized loss on valuation of public companies totaled $17.7 billion in the latest quarter across SoftBank’s two Vision Funds. Coupang was responsible for $6.7 billion of the loss.
Many senior investors have left the fund in the last couple of years. Deep Nishar, the latest high-profile departure, will join a competing investment firm, General Catalyst, in January, the New York Times reported Monday.
“What happened to us? We are in the middle of a blizzard,” Son said at the briefing in Tokyo, flashing a slide of snow-covered tundra. “The SoftBank Vision Fund performance is not something I’m proud of.”
SoftBank’s portfolio of Chinese startups was particularly hard-hit after the country’s regulators launched an offensive against technology giants. Didi, whose debut at the end of the previous quarter was one of the largest U.S. offerings of the past decade, lost $6.1 billion in the quarter and Uber-like trucking startup Full Truck Alliance Co. was down $1.2 billion.
KE Holdings Inc., which runs the Beike online property service, lost $2.2 billion of value. The little-known Chinese startup handed SoftBank an unrealized gain of $5.1 billion when it went public in August 2020, pushing up Vision Fund profit to a new record in that quarter. Even though the company has not been directly targeted by regulators, its stock is down more than 70% from its peak and is trading below the IPO price.
“If you look at the Vision Fund’s performance so far this year, pretty much everything they brought to market so far has lost money since listing,” Boodry said. “That’s an incredibly poor track record. They have been behind a lot of overpriced IPOs.”
SoftBank has said it will proceed cautiously with investments in China, estimating that 20% of the Vision Fund investments will go into the region. The country has been the source of Son’s biggest successes, but the Beijing crackdown has raised concerns about the future.
Son has also considerably scaled down his controversial program of trading stocks and options, liquidating his entire stakes in Amazon.com Inc., Taiwan Semiconductor Manufacturing Co. and PayPal Holdings Inc. SoftBank held a total of $5 billion of “highly liquid listed stocks,” down from $13.6 billion at the end of the previous quarter.
Son said that he personally lost about 150 billion yen in SB Northstar, the unit for trading public stocks. The business is now winding down, he added.
Son faced questions about his personal investment in Northstar last year, with some pointing to potential corporate governance concerns. People familiar with the matter said in December that SoftBank had begun to wind the strategy down. Most of the large stakes in listed firms are now no longer listed on SoftBank’s earnings, while today’s filing indicated that many of the more controversial bets on derivatives were also being wrapped up.
The operation was a wash for SoftBank as a whole, Son said at the briefing in Tokyo, because his investments came later. He added the loss hasn’t dissuaded him from continuing to make bets with his money, including personal investments in Vision Fund 2 and in the firm’s Latin American funds.
“I have lots of confidence,” he said. “I’m going to take risk again.”
(Updates with executive departure news in 12th paragraph.)
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