SoftBank has reported the highest ever annual net profit for a Japanese company thanks to a rise in the valuations of its investments, even as a sell-off in US technology stocks eroded those gains in the current quarter.
The record profits for the year ending March 30 were driven by a vibrant US market for initial public offerings, which turned the technology conglomerate’s $2.7bn investment in South Korea’s Coupang into a $28bn stake after the ecommerce company went public in March.
Since the end of March, however, the valuations of some of Vision Fund’s holdings have fallen because of a sell-off in US technology stocks that was sparked by concerns of inflationary pressures.
Coupang’s valuation, which at one point reached $118bn, has fallen to $62bn, while shares in Uber and KE Holdings, the owner of Chinese online property platform Beike Zhaofang, have both fallen 15 per cent since the end of March.
The changes underscored the volatility of SoftBank’s financial performance, which hit lows last year as the global pandemic spurred a huge sell-off in its assets.
“We believe [the market] volatility is here to stay and our view is that we need to have a very disciplined strategy for monetisation,” a person close to the Vision Fund said on Wednesday.
Pointing to companies such as Chinese ride-hailing company Didi Chuxing and TikTok owner ByteDance, which are expected to go public soon, the person added: “There is significant intrinsic value to be unlocked when they go public. That will offset any volatility you will see in the public markets.”
For the full year that ended in March, SoftBank reported a net profit of ¥4.98tn ($46bn), compared with a loss of ¥961bn a year earlier. That was well above a previous record of a ¥2.5tn profit reported by Toyota during the 2017-18 fiscal year, according to SMBC Nikko Securities.
SoftBank’s Saudi-backed $100bn Vision Fund and its sequel $30bn fund reported a ¥6.4tn gain in the value of their investments. As of the end of March, the fund’s $700m investment in Auto1, the German online car dealer that listed in February, was worth $2.3bn, while its $680m DoorDash investment was valued at $8.3bn.
Meanwhile, SB Northstar, the SoftBank unit set up to play the market in listed tech stocks, reported derivative losses of $300m for the January to March quarter, bringing total losses to $5.6bn since September.
Kirk Boodry, an analyst at Redex Holdings, said investors had already priced in a record quarter, and their attention had turned to how the IPO market would hold up and whether SoftBank would carry out further share buybacks to support its stock price.
SoftBank shares were trading at a 21-year high in mid-March but the stock has since fallen 14 per cent. The group did not announce a share buyback on Wednesday as it wrapped up a $23bn repurchase programme that was launched last year during the market sell-off caused by the pandemic.
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