SoftBank Pauses China Investing as Clampdown Roils Portfolio

By Reuters
August 10, 2021Business News
SoftBank Pauses China Investing as Clampdown Roils Portfolio
A man walks past a SoftBank mobile phone store in Tokyo, Japan, on Sept. 30, 2019. (Carl Court/Getty Images)

TOKYO—SoftBank Group Corp will pause its investing in China as it waits for regulatory action against Chinese tech firms to play out, Chief Executive Masayoshi Son said on Aug. 10.

“Until the situation is clearer we want to wait and see,” Son told a news conference. “In a year or two I believe new rules will create a new situation.”

When the Japanese conglomerate posted record annual profit in May, executives pointed to further upside from Vision Fund investments such as Chinese ride-hailing firm Didi Global Inc. and “Uber for trucks” startup Full Truck Alliance Co Ltd.

Those companies are listed in New York but Chinese regulatory action has subsequently hammered valuations, underscoring SoftBank’s China risk even as the group seeks to reduce dependence on its largest asset, a stake in Chinese e-commerce giant Alibaba Group Holding Ltd.

The shift has cast a chill on SoftBank’s investing in China, which makes up about a quarter of its funds’ portfolio.

The Vision Fund unit on Tuesday posted a first quarter profit of $2.14 billion, as gains from listings were offset by falling shares in firms like South Korean e-retailer Coupang Inc.

The China turmoil is clouding the outlook for the group, shares of which have slipped a third from two-decade highs in March amid the completion of a record $22.6 billion buyback. Shares closed up 0.9 percent ahead of earnings.

“Having a large public portfolio introduces volatility but at the same time it allows us to continue to monetise in a very disciplined manner,” said Govil.

Share price weakness and sell-side analyst speculation have driven expectation that a buyback may be imminent.

“Until now we have sold assets and announced a buyback. This time there was no event like that,” Son said.

Given the gap between the group’s share price and the value of its assets, he added, “I guess we will do a buyback sometime. The timing and size is something we consider daily.”

Masayoshi Son Softbank
Japan’s SoftBank Group Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, on Nov. 5, 2018. (Kim Kyung-Hoon/Reuters)

Vision Fund Upside

More than two-thirds of the portfolio of the first $100 billion Vision Fund is listed or exited. SoftBank has distributed $27 billion to its limited partners since inception.

Further upside will come from listings by Indian payments firm Paytm and insurance aggregator Policybazaar as well as southeast Asian ridehailer Grab, which is due to go public via a blank-cheque company merger, Govil said.

SoftBank is also ramping up investing through Vision Fund 2, to which it has committed $40 billion of capital, with the unit making 47 new investments worth $14.2 billion in the April-June quarter alone.

Son said he would invest in the second fund through a scheme using his SoftBank shares as collateral.

In its first quarter, Vision Fund unit gains included $2.8 billion from selling shares in investments such as delivery firm DoorDash Inc. and ridehailer Uber Technologies Inc.

However, group net profit fell 39 percent to $6.9 billion.

SoftBank has also been betting on publicly listed shares through its SB Northstar trading unit.

It held stakes in firms worth $13.6 billion at the end of June with the portfolio no longer including Microsoft Corp or Facebook Inc., which were listed three months earlier.

The unit will shrink as SoftBank prioritizes the Vision Fund, Son said.

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