[Request 👋] SoftBank - TYO:9984

Softbank just invested $440 million in challenger OakNorth which provides funding for businesses. I’m a fan of OakNorth but seeing them put that much money into a relatively obscure company & as part of a round that only included one other investor blew my mind slightly.

Meanwhile here’s the FT’s Lex team’s comments on SoftBank’s latest share buyback -

Record buyback may be an attempt to appease investors for increased risks

4 Likes

Any idea if its possible to add Softbank in the near future?

https://community.freetrade.io/t/softbank-9984/2874

3 Likes

We don’t have a timescale for this right now I’m afraid, keep an eye on the blog & this post for updates.

It’s worth mentioning that we’ve added Baillie Gifford Japan Trust (BGFD) to the app now -

Another does-what-it-says-on-the-tin trust. This trust, managed by the same firm behind Scottish Mortgage Trust, invest in a variety of enterprises in Japan, currently including Softbank, Rakuten and Sony.

quote from this blog post

2 Likes

Not perfect, but a 5% holding and they’re leveraged 11-17% which is good! Thanks Alex :slight_smile:

1 Like

$130,000,000! Arghhh! :sob:

3 Likes

Imagine the return if it had paid off!!

I think that’s what got them in trouble in the first place :slightly_smiling_face:

1 Like

I’ll admit to not having analysed every detail of this, but the SoftBank earnings presentation is now online. :popcorn:

1 Like

I was thinking about Softbank this afternoon after reading a Boston Dynamics article. I would be interested in peoples view for the long term with Softbank, maybe with a new ceo or some change

1 Like

And it doesn’t seem like Vision Fund 2 is arriving any time soon.

1 Like

They got some cracking companies on their VF1, like PingAn Doctor, ZhongAn and others.

I just feel that they are massively over indexing on Uber, and that WeWork will remain a massive milestone around their next now all the fake-tech and New Age gloss around it has worn off and people started to price it as what it actually is - a property company with some fussball tables in the lobby.

1 Like

Starlink competitor OneWeb may face bankruptcy

OneWeb, a SoftBank-backed competitor of Starlink, is also in the middle of launching its own global satellite constellation. But Bloomberg reported on Thursday that OneWeb is considering filing for bankruptcy, with the report saying the company is facing a cash crunch. OneWeb has raised $3.4 billion to to fund its satellite network, but CEO Adrián Steckel told CNBC in a February interview that the company “is always raising” money.

It just cross my mind. Do these companies with plans to launch global satellite constellations need to get permission from every country in the world? Cuz air space permissions and violations?! Or it doesn’t apply cuz of altitude?! Superpowers clash over this?!

“SoftBank plans $41bn asset sale to cut debt amid coronavirus tumult” - FT

Response to halving of share price includes plan to repurchase ¥2tn of its own stock

SoftBank is launching an emergency ¥4.5tn ($41bn) asset sale to fund a share buyback and debt reduction, in a determined effort by Masayoshi Son to stem a collapse in the company’s share price sparked by the coronavirus crisis.

Shares in the Japanese technology group soared almost 19 per cent on Monday after it unveiled the programme, which includes a plan to repurchase ¥2tn of its own shares on top of the ¥500bn buyback it promised 10 days ago. Combined, SoftBank would be repurchasing 45 per cent of its stock.

“This programme will be the largest share buyback and will result in the largest increase in cash balance in the history of SBG [SoftBank Group], reflecting the firm and unwavering confidence we have in our business,” Mr Son, the group’s founder and chief executive, said in a statement.

SoftBank did not disclose which assets it would sell over the next 12 months from its sprawling portfolio, but analysts are focusing on its $140bn stake in Chinese ecommerce group Alibaba.

The asset sale comes amid a tumultuous period for the Japanese conglomerate. On Monday the Financial Times reported that Leon Black’s Apollo Global Management hedge funds had placed a large short bet against bonds issued by SoftBank, a trade that Apollo had discussed with investors at a presentation in December, according to two people in attendance, citing concerns over SoftBank’s debt load.

Meanwhile, the conglomerate’s woes over its investment in lossmaking office space provider WeWork entered a newly acrimonious phase this week, as two of WeWork’s directors, Bruce Dunlevie and Lew Frankfort, publicly attacked the Japanese conglomerate over its attempts to renege on an agreed purchase of $3bn of WeWork’s stock.

“Not only is SoftBank obligated to consummate the tender offer as detailed by the master transaction agreement, but its excuses for not trying to close are inappropriate and dishonest,” the pair said on Sunday.

SoftBank’s new programme would represent about 17 per cent of the $245bn in assets SoftBank currently owns, which also includes US carrier Sprint and UK chip designer Arm.

Elliott Management, the $40bn US activist fund, recently built a $2.5bn stake in SoftBank, demanding a $20bn share buyback and greater transparency for the $100bn Vision Fund.

SoftBank’s share price has halved over the past month due to market concerns that the group, which is already saddled with net debt of $55bn, will face a bigger financial burden as its investments in ride-hailing and hotel groups are hit by the economic fallout of the coronavirus pandemic.

Among its other investments backed by its Vision Fund, Oyo Hotels, the Indian hospitality start-up, is reducing its workforce in China, while operating losses at London-based tech company Improbable Worlds jumped almost two-thirds in its latest financial year.

“We know that the Vision Fund could be dangerous but we don’t know where or how much,” said Kirk Boodry, a tech analyst at Redex Holdings who publishes on research platform Smartkarma. “When the bad things come out, people are now ready to have something to fall back on.”

SoftBank paired its share buyback announcement with a plan to pay down its debt, a move that came after credit-rating agency S&P Global recently cut its outlook on the company.

https://www.ft.com/content/3cc38c08-6aba-11ea-800d-da70cff6e4d3

Moody’s puts Softbank’s credit rating further into the junk territory

Rating Action: Moody’s downgrades SoftBank Group to Ba3; places ratings on review for further downgrade The document has been translated in other languages

25 Mar 2020

Tokyo, March 25, 2020 – Moody’s Japan K.K. has downgraded SoftBank Group Corp.'s (SBG) corporate family rating (CFR) and senior unsecured rating to Ba3 from Ba1, and its subordinate rating to B2 from Ba3.

At the same time, Moody’s has placed the ratings under review for further downgrade.

The affected ratings and issuers are listed at the end of this press release.

The rating action follows SBG’s announcement on 23 March 2020 that it will monetize up to JPY4.5 trillion (about $41 billion) of its investment portfolio and use the proceeds to repurchase up to JPY2 trillion ($18 billion) of its own shares. It will use the remaining JPY2.5 trillion ($23 billion) to pay back its debt at the holding company. The company plans to execute these transactions over the next four quarters.

SBG’s latest share repurchase plan is four times the JPY0.5 trillion share repurchase it announced less than two weeks ago.

RATINGS RATIONALE

The two-notch downgrade to Ba3 reflects SBG’s aggressive financial policy, as reflected by the unexpected size and apparent urgency of the rapid series of share repurchases, just as the drop in the stock market has put the value and liquidity of its portfolio value under stress.

“Asset sales will be challenging in the current financial market downturn, with valuations falling and a flight to quality,” says Motoki Yanase, a Moody’s Vice President and Senior Credit Officer.

In particular, the value and credit quality of SBG’s portfolio would deteriorate if the company reduces some of its most liquid and highly-valued listed investments, such as its stakes in Alibaba Group Holding Limited (A1 stable), SoftBank Corp. and Sprint Corporation (B2, review for upgrade). It is unclear why SBG is undertaking such a dramatic recapitalization during a time of severe stock and market volatility. Monetizing a significant part of its investment at this time risks a discount as well as a deterioration in the quality and value of its remaining portfolio.

The review for further downgrade considers the volatile capital market conditions that could weaken the valuation of SBG’s investee companies, hinder the execution of its recapitalization plan, and weaken SBG’s leverage and liquidity position.

Moody’s review will focus on (1) the extent to which the fall in financial markets erodes the value and credit quality of the investment portfolio that covers SBG’s debt; (2) the timing and the amount of asset sales the company is able to execute under the current market conditions, as well as the credit quality of its remaining investment portfolio; and (3) the change in SBG’s capital structure as it repurchases stock, pays down debt and increases secured obligations such as margin loans.

In addition, Moody’s recognizes SBG’s substantial JPY1.7 trillion (about $15 billion) of cash balance that covers the next two years’ scheduled debt maturities. Downward rating pressure would build if this liquidity cushion weakens.

Given the ratings are on review for downgrade, Moody’s does not expect upward rating pressure in the foreseeable future. An upgrade is possible longer term if the SBG executes on its recapitalization and demonstrates greater transparency and sustainability of its assets and capital structure.

Moody’s would consider a further downward rating action if 1) there is a significant deterioration in the credit quality of SBG’s investee companies, including difficulty in turning around WeWork; 2) cash held at the holding company level diminishes, such that its cash and committed credit facilities no longer cover two years of debt maturities; and 3) there is increase in debt, including margin loans and crystallization of legal or other contingent obligations.

The principal methodology used in these ratings was Investment Holding Companies and Conglomerates (Japanese) published in August 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Tokyo, SoftBank Group Corp. is a Japanese holding company, with subsidiaries engaged in various businesses, including telecommunications, internet and other technology businesses.

https://www.moodys.com/research/Moodys-downgrades-SoftBank-Group-to-Ba3-places-ratings-on-review--PR_420820

1 Like

SoftBank has demanded that Moody’s remove all of its bond ratings on the Japanese conglomerate, after the rating agency issued a two-notch downgrade that cut its debt deeper into junk status.

The group led by Masayoshi Son, the risk-seeking Japanese dealmaker, immediately accused Moody’s on Wednesday of having “biased and mistaken views”.

The downgrade came two days after SoftBank said it planned to sell $41bn of its assets to pay down its heavy debt load and to hugely increase the scale of a share buyback.

Those actions have triggered a 55 per cent jump in SoftBank share price, which fell to a four-year low last week as investors panicked over its hefty debt exposure.

https://www.ft.com/content/5b5048ae-d00d-4b97-ad98-e63c0f44473b

1 Like

FT:

OneWeb, the satellite internet start-up, is preparing for bankruptcy and to lay off most of its staff, after failing to secure new funding from investors including its biggest backer SoftBank, according to people familiar with the situation.

Link - https://www.ft.com/content/8695c459-effd-4b54-8d96-69d8e614f6b4

https://www.bloomberg.com/news/articles/2020-04-03/softbank-vision-fund-is-losing-a-partner-it-promoted-last-month?srnd=technology-vp

SoftBank Investment Advisers, which oversees the $100 billion Vision Fund, lost another senior member of its team, according to people with knowledge of the matter. This time it’s Carolina Brochado, who was promoted to partner just last month.

The London-based partner resigned this week after bonuses were paid on March 31, said the people, who asked not to be identified discussing personnel issues. She won’t leave immediately and will help with the transition of her responsibilities, one of the people said

Vision Fund employees have described the company culture as one that rewards aggression and recklessness, Bloomberg Businessweek reported in December. SoftBank’s investments have reshaped Silicon Valley’s startup environment in recent years, but the company is struggling to raise outside capital for the second Vision Fund. This week, SoftBank abandoned an agreement to buy additional WeWork stock from the startup’s shareholders.

Brochado joined SoftBank early last year, and according to her LinkedIn profile, her investments at SoftBank included Brazilian fitness startup Gympass and Behavox, a compliance and employee-monitoring software company that in February raised $100 million from SoftBank Vision Fund II.

FT:

…Its shares were falling rapidly as investors speculated that Mr Son, who famously lost $70bn in the dotcom crash, was facing another reckoning.

… last year, Mr Son pledged some of his stake as collateral to help the founder of India’s Oyo secure funds to boost his position in the hotel start-up. The deal doubled the valuation of lossmaking Oyo to $10bn from the level the Vision Fund had invested in it.

If SoftBank’s shares kept falling, banks would demand Mr Son put up more collateral. People close to SoftBank insist no margin calls were made to Mr Son.

Eventually, Mr Son settled on asset sales that would fund a further $19bn (¥2tn) buyback. “In a way, that buyback is a public LBO [leveraged buyout]. It’s just that changed the source of capital, which was no longer Masa and his consortium partners,” said one of the people involved in the talks. It amounts to 33 per cent of all of SoftBank’s shares outstanding at current valuations.

Executives pushed Mr Son to go further, noting that S&P Global had downgraded its outlook on SoftBank debt to negative after the first buyback and telling him that some of the company’s net debt of $55bn, part of a wider $180bn of borrowing, should also be paid down.

Veteran equity and credit analysts in Tokyo say they now assume that all three of Japan’s megabanks — MUFG, Mizuho and SMBC, have reached their maximum lending limits with SoftBank after extending tens of billions of dollars of loans.

Mr Son appears to have stopped writing the outsized cheques that made him the world’s most aggressive start-up investor. On that Saturday, SoftBank withdrew from talks to further fund OneWeb. It also walked away from a previously agreed $3bn deal to buy shares from WeWork investors, including its co-founder Adam Neumann and Benchmark Capital, on which another $1.1bn SoftBank loan to the company depended.

But not everyone has been convinced. Ratings group Moody’s issued a two-notch downgrade of SoftBank’s debt. SoftBank responded by calling Moody’s views “biased and mistaken”, demanding the agency withdraw its rating.

The issue with the current strategy, according to one adviser, is that: “It is not a strategic move forward. It’s too defensive for Son. I would not be surprised if we see him announcing some acquisitions — probably in the 5G and telecoms space and potentially big.”

https://www.ft.com/content/d4ac5bad-c074-4335-a200-d821eda66632

SoftBank expects its $100 billion Vision Fund to book a loss of $16.5 billion due to the worsening performance of its tech bets, which will tip the group as a whole into its first loss for 15 years.

A third consecutive quarter of losses by the Saudi Arabian-backed fund will push SoftBank to an annual operating loss of $12.5 billion, it said in a statement on Monday.

The fund’s dire performance, which SoftBank attributed to “the deteriorating market environment” as markets are hammered by the coronavirus crisis, is a major blow to CEO Masayoshi Son’s attempts to revive his reputation among investors.