During a recent earnings presentation, Softbank founder Masayoshi Son (pictured here in 2019) said the company would go into “defense” mode as a result of the countless headwinds that have destabilized global markets.
Tomohiro Ohsumi | Getty Images
According to Oliver Matthews of CLSA, the Japanese conglomerate SoftBank Group may, for the first time, spend more on share buybacks than investing through its Landmark Vision Fund as the firm goes into “defense” mode.
Softbank posted a record $ 27 billion loss in its Vision Fund on Thursday as technology stocks dwindled in recent months.
During an earnings presentation, Softbank founder Masayoshi Son said the company would be in a “defense” mode due to the innumerable headwinds in the global market, from the fear of inflation to the US Federal Reserve raising interest rates. Growth stocks like high interest rate environment technology tend to be negative because it makes their future earnings look less attractive.
“I think Masayoshi’s son’s comments yesterday made it very clear that we are in Defense Round 2,” Matthew, head of the firm’s Asia consumer, told CNBC’s “Squawk Box Asia” on Friday.
“They started the first round of defense when they saw Kovid. They started selling some of their less valuable assets. They invested heavily in Vision Fund 2 but now they seem to be in the second round of defense where .. they are not sure how. The game is on between those investments, “he said.
The firm’s Vision Fund invests in high-growth stocks and makes big bets on companies ranging from Chinese tech giants like Alibaba and Didi to South Korean e-commerce firm Kupang.
“I think this is probably the first time we’ve seen them spend more than their new investment in Vision Fund 2 for their own share buyback,” Matthew said. In November, the organization announced plans to buy up to one trillion yen (7.77 billion) of its own shares.
Public valuations show that a number of SoftBank’s investments are “still doing very poorly this quarter,” said Matthew, who referred to the confused sister as the “worst draw” of the Vision Fund. The Chinese ride-hailing firm is under investigation by the U.S. Securities and Exchange Commission after making a scandalous initial public offering.
“They are not completely out of the forest, which is why you are hearing this very defensive message,” he added. “On Flipside, their share price [has] It was obviously too weak. “
Shares of SoftBank Group rose more than 12% on Friday, but the week still ended less than 2% as investors around the world avoided risky assets such as technical stocks and cryptocurrencies.
Nevertheless, Softbank does not seem to be alone in equating its investments in the private market.
Atul Gayal, managing director of Jefferies Asia, said: “There are some very large asset managers who have decided to personally reduce their exposure for the time being and have begun to focus a little more on public assets.”
“If all that is happening now goes … one, two, three years, yes there will be some decent bargaining, some companies will eventually focus on cash flow and profit,” Atul told CNBC’s Street Sciences Asia. Says. Friday. “It depends on how long this kind of market lasts and how long this dry spell for funding lasts.”
– CNBC’s Arjun Kharpal contributed to this report.