Buy & Sell Arguments after SoftBank Q1 Earnings Call

May 12, 2023

3 min read

SoftBank Group Corp. held an earnings call for fiscal year 2023, ending March 31, 2023, and presented its consolidated results for the past year, noting a slight increase in net sales.

The company discussed its performance in investment business and Vision Fund 1 and 2, the former having invested about JPY90 billion, and the latter investing JPY50 billion to date, and the company lost a cumulative JPY8.5 billion on investments lower than the book value.

SoftBank Group also noted its investment in Arm had performed better than expected, with a 3-year CAGR of 16% and 60% in terms of adjusted EBITDA CAGR.

SoftBank Group Corp. has released its Q4 2023 earnings results with a slight increase in net sales of JPY6.5 trillion and an investment profit and loss of JPY2.6 trillion.

The loss on investments is attributed to the slump in the market environment caused by the U.S-China and Russia situations, while the evolution of technology, particularly in the AI era, presents an opportunity for the company to balance between defense and offense modes for future strategies.

The consolidated net income on a quarter basis has been improving, with the second quarter of the last fiscal year recording larger Alibaba-related transactions. The Vision Fund shows cumulative gain or loss in investments of JPY8.5 billion, below the book value.

Among the portfolio companies that have lost their value, factors such as their performance, market factors, and rate change were identified as contributing factors.

The portfolio companies are well capitalized, and almost 94% of them have enough financial capabilities to keep them running.

The company is executing a disciplined monetization strategy, and preparations for the Arm IPO are running smoothly.

Buy arguments:

SoftBank Group Corp. invested in Arm, a company that has performed better than expected, suggesting potential for future growth.
The company is seeking strategies to move from a defense mode to a balance between defense and offense, meaning they are seeking new investment opportunities for growth.
The company has a disciplined monetization strategy to repay capital to third-party LPs, indicating a responsible approach to managing investments.

Sell arguments:

SoftBank Group Corp. lost a cumulative JPY8.5 billion on investment, lower than the book value for Vision Fund 1 and 2.
The tough market conditions of geopolitical risks and financial system instability impacted SoftBank Group Corp.’s investments.
The decline in the venture capital index and Chinese companies index suggests a challenging environment for investment.

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