As valuations have slipped, storm clouds have converged on SoftBank Group

Reuter

The Logo of SoftBank Group Corp was unveiled at SoftBank World 2017 in Tokyo

A few days ago, when SoftBank Group was preparing to announce its third-quarter earnings report, dark clouds hung over it, the valuations of top portfolio companies fell, and heavyweights left the Japanese technology group.

SoftBank's major assets listed last year include ride-hailing company Didi Global, e-commerce company Coupang and used car platform Auto1 Group.

In the quarter ended December 31, AI company SenseTime was a bright spot, but others, such as Paytm's parent company One 97 Communications, were disappointing.

Kirk Boodry, an analyst at Redex Research, said: "The valuations they have made are not maintained. "There are more doubts."

The new year left CEO Son with little respite: January was a scarred month as investors moved away from growth stocks that promised future profits.

Amir Anvarzadeh, an analyst at Asymmetric Advisors who advised on shorting the company, wrote in a note: "This seems to be a more critical period for SoftBank compared to 2020, when some of its big bets, such as WeWork and Oyo, have failed. ”

SoftBank is struggling to get investors to re-evaluate its stock, which has fallen about half since last March's highs. The group launched a $1 trillion ($8.7 billion) buyback in November.

LightStream Research analyst Mio Kato wrote in a report on the Smartkarma platform: "We do not believe that anything other than a sharp price cut will allow the market to declare that the downside risk has been fully absorbed. ”

As the company shut down its SB Northstar trading division, it is pooling its funding into its second Vision Fund, which has invested less in more than 150 startups than it did in its first iteration.

A major reason for the group's buybacks last year was executives' continued frustration with the group's discount margins or the gap between the value of its assets and their share prices.

Due to regulatory hurdles, it is widely expected that chip designer Arm's sale to Nvidia may release funds for further share buybacks. An initial public listing was seen as an alternative, but analysts questioned the prospects of the move.

Jefferies analyst Atul Goyal wrote in a note: "We doubt arm's outright IPO will create value for SBG shareholders. ”

Other assets include a stake in e-commerce company Alibaba, which has fallen sharply as Chinese tech companies have been hit by regulatory action, while telecoms company SoftBank has traded below its listing price.

Top executives, including COO Marcelo Claure, have begun to exit the company. This shift underpins the pivotal role of Vision Fund CEO Rajiv Misra as SoftBank prioritizes investing through the sector.