Two months since Masayoshi Son suggested that he was misunderstood like Jesus Christ, the billionaire founder of SoftBank of Japan has performed at least one miracle: resuscitate his share price.
Shares in the Tokyo-listed technology conglomerate have risen 143 percent in value since it hit a panic-inducing low in mid-March.
They are now at a peak of 20 years, while some of the biggest investments in their $ 100 billion Vision Fund, like Uber and Slack, have seen their stock prices double in the same period.
After selling assets and reviewing their investments with bankers, including the $ 32 billion chip designer Arm, SoftBank is set for another round of negotiations.
“There are incredible investment opportunities opening up for companies sitting down with enough dry powder to take advantage of,” said Marcelo Claure, one of Son’s trusted lieutenants, in an interview on Zoom from Aspen, Colorado. “We are much more cautious. . . but it feels much better to be in the position where we are today. ”
Claure, who joined SoftBank in 2013 after acquiring the telecommunications group Brightstar and is now its chief operating officer, added that SoftBank was “better positioned than ever” to do business.
“I don’t think there has been a stronger SoftBank than the SoftBank we have today in SoftBank history,” he said.
If a new negotiation period is on the horizon, the Bolivian-American executive strove to explain all the personal care SoftBank has suffered in recent months to put Son in that position.
In particular, he underlined the importance of closing a difficult merger between Sprint, the US mobile operator controlled by SoftBank, and its biggest rival T-Mobile in the third attempt in April.
Last month, SoftBank, which had been struggling with Sprint’s large debts and making fortunes for years, navigated through a restrictive lockout agreement to raise $ 23.2 billion from the sale of part of its stake in the combined company.
After also selling its stakes in Alibaba, the Chinese e-commerce group and its Japanese telecommunications business, SoftBank is 90 percent on track to raise the $ 41 billion it promised to spend on buybacks and reduce its debt.
The phase-out program, announced in mid-March, followed a heartbreaking weekend in which the slump in SoftBank stock and bond prices caused Son to consider whether he should try to make the group private.
“The crisis gives you the opportunity to act decisively, to act boldly and differently. We were in the midst of the financial crisis and the pandemic, with a huge number of strangers, “said Mr. Claure.
“If you look at the history of SoftBank, traditionally, we have been buyers, we have been investors. We have hardly ever been sellers. . . We made a very bold decision that we were going to monetize some of our assets. “
The measures appear to have gone a long way in restoring investor confidence. SoftBank’s market value has risen to $ 128 billion from a low of $ 51 billion on March 19.
The price of a $ 2.75 billion perpetual bond, which is a major risk to investors since SoftBank is never required to pay it, has recovered to 93 cents on the dollar, having dropped as low as 67 cents in March.
Oliver Matthews, an analyst at brokerage CLSA, said the gains in share prices, driven in part by Alibaba’s stock surge to record highs, have reduced the discount by the sum of the valuation of parts of the holdings. SoftBank and its capital valuation of about 75 percent to 40 percent.
“The stock has gone from being extraordinarily cheap to cheap, but investors have not yet really valued asset sales, share buybacks and debt reduction,” he said.
Claure’s attention has shifted to Arm Holdings, which Son previously said is at the center of his vision for an era in which machines and humans interact ever more closely.
But last week, SoftBank said it had cut an Arm’s Internet of Things business and transferred it to a new company under its control. Its ownership will be divided as will Arm’s, with SoftBank controlling 75 percent of the business and the remainder in the Vision Fund.
The decision stripped Arm of what was meant to be the high-growth engine that would propel it into a connected 5G future. But Mr. Claure argued that the IoT business was a high-cost distraction dragging down Arm’s financial results and would be better served under separate management.
After the split, he said Arm would be more focused on its core chip design business and on track for an initial public offering that will come in the coming years. “When it is time to do an IPO is when we would have realized most of the value. It’s fair to say that I don’t see Arm as a public company in the next 12 months. “
A person with knowledge of SoftBank’s decision-making said he had also hired Goldman Sachs to evaluate all options for Arm, including a possible full or partial sale after receiving expressions of interest. The review was first reported by the Wall Street Journal on Monday.
Vision Fund’s fortunes have also benefited from the recovery in US stock prices for tech-oriented companies and the reopening of the US market for initial public offerings.
After a successful market debut this month, SoftBank’s $ 300 million investment in new home insurance company Lemonade is worth more than $ 1 billion. Other companies in its Vision Fund portfolio are considering a public listing, including DoorDash, the US food delivery startup and cancer drug developer Relay Therapeutics.
But Mr. Claure admitted that there were mistakes. He was one of the small cadres of SoftBank executives who invested last year with Mubadala of Abu Dhabi in a € 900m convertible bond on Wirecard, in a vote of confidence in the German payments company, even when faced with questions about your accounting.
Wirecard collapsed in insolvency last month after admitting a € 1.9 billion hole in its balance sheet, eliminating hundreds of millions of dollars in paper earnings for SoftBank and Mubadala executives.
The hectic deal raised questions about SoftBank’s due diligence and reputational risks from the decision to partner with a company accused of accounting fraud allegations.
“I can assure you that every time the Wirecard transaction was made, we had absolutely no idea,” said Mr. Claure, adding that they trusted EY’s audit opinion in making the investment. “We thought the company was right. And unfortunately, that was not the right way. “
He added that it could be said that the company’s biggest mistake, by investing more than $ 10 billion in the shared work group WeWork, was turning to itself and that its team would have accomplished a “mission impossible” by making the flow cashier be positive next year.
“I think the beauty of SoftBank and this management team is that we can learn from our lessons. We’re going to improve the next time we do it, ”Claure said. “Sometimes things work the way you want them to work, and sometimes these things don’t work. A big problem is learning from those mistakes and being sure that we will never make them again. ”
Additional reports by Robert Smith
