Blizzard-hit SoftBank launches buyback after $10b Vision Fund loss

SoftBank Group Corp. slumped to a quarterly loss on Monday, as its Vision Fund unit took a $10 billion hit from a decline in the share price of its portfolio companies.

Even as the value of its assets slide, the Japanese tech conglomerate said its stock is undervalued and will spend up to 1 trillion yen ($9 billion) buying back nearly 15 percent of its shares.

While CEO Masayoshi Son has likened SoftBank to a goose laying "golden eggs", Monday's results underscore the headwinds for the investment business.

"We are in the middle of a blizzard," Son told a news conference, adding he was "not proud" of the Vision Fund's performance in the quarter. Yet he said the company was making steady steps to double the numbers of "golden eggs" compared to last year.

Among the group's portfolio, Chinese e-commerce firm Alibaba saw its valuation fall by around a third in the second quarter. 

The group was also hit by South Korean e-commerce firm Coupang, with first-half net profit down more than 80 percent on-year. Its stake in Chinese ride-hailer Didi, acquired for $12 billion, was valued at $7.5 billion. 

Son says the change in the value of the group's assets rather than profit is the primary measure by which performance should be gauged. Asset values plunged by 23 percent to $187 billion in the three months to September.

While SoftBank shares trade at around a 50 percent discount, lower than a record gap that triggered the launch of an eventual 2.5 trillion yen buyback last year, the conglomerate has the capital to do repurchases now, Son said.

"I am excited because we are discounted compared to our true strength," Son said.

Investors have been calling for a buyback to enhance returns. Repurchased shares will be retired, a move that lowers the bar for Son, SoftBank's top shareholder, to potentially launch a management buyout.

Future upside for the Vision Fund includes its India portfolio with ride-hailer Ola and logistics firm Delhivery targeting listings. 

The group's net loss of 398 billion yen compared to a profit of 628 billion yen a year earlier. Vision Fund's investment loss totalled 1.167 trillion yen.

SoftBank shares, which have lost around a quarter this year, closed down 0.77 percent at 6,161 yen ahead of earnings on Monday.

(With input from Reuters)

(Cover via CFP)

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