Masayoshi Son’s vision at odds with buyback hopes

3 minute read

Japan's SoftBank Group Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, November 5, 2018.

HONG KONG, Aug 10 (Reuters Breakingviews) - Ever tried listening to one soundtrack online while another is playing? Investors tuned into SoftBank’s (9984.T) earnings presentation on Tuesday in the hope of strategies to address shares trading at roughly half of net asset value. Founder Masayoshi Son instead talked up portfolio companies in the group’s Vision Fund and the long-term potential of its artificial intelligence bets. One of those can probably fix the dual-audio issue. Investor patience will be harder to find.

The Japanese conglomerate’s shares have fallen one-third in three months, hit by weakness in tech stocks and more recently, the sharp falls in several investments including Chinese ride-hailing app Didi Global (DIDI.N) and its trucking equivalent, Full Truck Alliance (YMM.N), following a regulatory crackdown just after quarter-end. SoftBank has slowed its China investments to 11% of its spend so far this financial year, compared with a 23% weighting in its current investments. This wait-and-see should be some relief to shareholders.

Yet all of this has left SoftBank shares at a 55% discount to the company’s net asset value – a level previously associated with offers to buy back its own shares. Son noted in an earnings presentation that previous share repurchases followed points when it had cashed in on investments, which wasn’t the case just now. The last buybacks, completed in May, cost $23 billion. Trimming some of its $130 billion Alibaba (9988.HK) holding could have gone some way towards a new programme.

Recently the enigmatic boss has been re-emphasising a long-favoured theme of thinking and investing over long time horizons. SoftBank accounts for 10% of all global AI investment for example – a bet he has likened to the Rothschild banking family’s funding of nineteenth century industrialisation. But the cold facts of the here-and-now are that investors tracking the tech-heavy Nasdaq Composite have made 39% over the past year and just 8% by backing Son’s vision.

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- SoftBank Group on Aug. 10 reported first-quarter net gains of 1.26 trillion yen ($11.4 billion) on its investments including from recently listed portfolio companies which outweighed falls in several others.

- The Japanese conglomerate’s Vision Fund unit, which holds many of its tech and startup investments, posted a 236 billion yen adjusted net profit in the three months to June 30.

- The numbers followed record annual net profit for the year ended in March as markets rallied worldwide. However, some of its investments such as Chinese ride-hailing app Didi Global which debuted in New York just after quarter-end, have performed less well and prompted a wider selloff in Chinese markets.

- SoftBank’s shares have fallen 27% since the end of March.

Editing by Una Galani and Sharon Lam

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