In a recent earnings presentation, SoftBank founder Masayoshi Son (pictured here in 2019) said the company would go into “defense” mode due to a myriad of headwinds rocking global markets.
Tomohiro Ohsumi | Getty Images
Japanese conglomerate SoftBank Group could for the first time spend more on share buybacks than investments through its historic Vision Fund as the company shifts into “defense” mode, according to CLSA’s Oliver Matthew.
On Thursday, SoftBank posted a record $27 billion loss in its Vision fund as tech stocks have fallen in recent months.
During an earnings presentation, SoftBank founder Masayoshi Son said the company would go into “defense” mode due to a myriad of headwinds that rocked global markets, from inflation fears to the US Federal Reserve interest rate hike. A higher interest rate environment tends to be negative for growth stocks like technology, as it makes their future earnings less attractive.
“I think yesterday’s comments from Masayoshi Son made it clear that we were on defense in the second round,” Matthew, the company’s head of Asian consumers, told CNBC’s “Squawk Box Asia” on Friday.
“They started the first tower of defense when they saw Covid, they started selling off some of their less essential assets. They invested a lot in Vision Fund 2, but now they seem to be in the second tower of defense where.. they don’t know how some of these investments are going to turn out,” he said.
The company’s Vision Fund invests in high-growth stocks and has made significant bets in companies ranging from Chinese tech giants like Alibaba and Didi to South Korean e-commerce firm Coupang.
“I actually think it’s possible for the first time maybe we see them spending more on their own share buybacks than on new investments in Vision Fund 2,” Matthew said. In November, the conglomerate announced a plan to buy back up to one trillion yen ($7.77 billion) of its own shares.
Public values show that a number of SoftBank’s investments are “still doing very badly this quarter,” said Matthew, who cited the embattled Didi as “one of the worst drags” on the Vision Fund. The Chinese ride-hailing company is under investigation by the U.S. Securities and Exchange Commission after a tarnished initial public offering.
“They’re not completely off the hook, which is why you hear this very defensive message,” he added. “On the other hand, their share price [has] obviously been quite low.”
Shares of SoftBank Group soared more than 12% on Friday but still ended the week down more than 2% as investors around the world shunned riskier assets such as tech stocks and cryptocurrencies. currencies.
Still, SoftBank doesn’t appear to be alone in cutting its private markets investments.
“Some very large asset managers have decided to reduce their exposure to private assets for now and start focusing a bit more on public assets,” said Atul Goyal, managing director of Jefferies Asia.
“If everything that’s going on right now lasts for … one, two, three years, then yes, there will be good deals, some companies will finally focus on cash flow and profits,” Atul told ” Street Signs Asia” from CNBC. Friday. “It depends on how long this type of market lasts and how long this dry spell for funding lasts.”
– CNBC’s Arjun Kharpal contributed to this report.