Japan’s SoftBank pauses China investing as crackdown roils portfolio

REUTERS/Issei Kato

SoftBank Group Corp will pause its investing in China as it waits for regulatory action against the country’s tech firms to play out, Chief Executive Masayoshi Son said on Tuesday.

“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 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.

While the crackdown has affected returns expectations, “our broader thesis in China is unchanged: It’s still a large, growing and compelling economic opportunity,” said Navneet Govil, the chief financial officer of Vision Fund.

The Vision Fund unit on Tuesday posted a first-quarter profit of 236 billion yen ($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 2.5 trillion yen buyback. Shares closed up 0.9% 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 the 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.”

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 its 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 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 310 billion yen from selling shares in investments such as delivery firm DoorDash Inc and ridehailer Uber Technologies Inc.

However, group net profit fell 39% to 762 billion yen.

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 listed three months earlier.

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

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.