Daily Management Review

Better Performance Of Its Bets To Likely Return SoftBank To Profitability


Better Performance Of Its Bets To Likely Return SoftBank To Profitability
With the rise in value of the companies in which it had invested, it is expected that the Japanese investment conglomerate SoftBank Group will return to profitability in the first quarter. The company had reported record annual losses after the investments made through its Vision Fund had faltered at the stock markets and companies it had invested in did not do well.
According to the average of three analyst estimates compiled by Refinitiv, it is likely that the Japanese conglomerate will make an operating profit of 171 billion yen ($1.62 billion) for the April-June quarter. Even then however the number would mark a 57 per cent drop in profits compared to the profits made by it in the same quarter  year ago.
Analyst Kirk Boodry at Redex Research believed that SoftBank is likely to return to a profit path because of the performance of the $100 billion Vision Fund's public assets.
The successful July listing of the insurance startup Lemonade will be one of the likely drivers of SoftBank’s performance. Another of it investments, food delivery service DoorDash, has already filed to be listed which will be another round of test for the appetite of investor to go for money-losing startups.
How the Vision Fund values its portfolio I one uncertain aspect from analysts’ point of view. In the year ended March, that fund recorded a 1.9 trillion yen operating shortfall with failure of some of the investments made by the firm’s Chief Executive Masayoshi Son such as the stumbling of the United States based shared office space startup WeWork.
The Japanese investment firm took measures faced with the losses with the jettisoning satellite operator OneWeb and initiating a share buy-back program that was funded by sale of its assets in companies in order to prop up the share prices of the company. 
SofBank has divested its stakes in the Chinese e-commerce firm Alibaba Group as well as in the wireless carriers SoftBank and T-Mobile US.
According to recent media reports, the Japanese company is also planning to sell chip designer Arm. That will be a potential diversion from a firm that was praised by Son as closely aligned with his vision. However the chip designer has subsequently been losing money since Son’s comments.
The poor performance of the Vision Fund has also made it hard for the Japanese firm to secure capital investments for its second mega-fund and therefore has been forced to invest itself.
"With the amount of assets that have been sold, the next logical step is to move forward on Vision Fund 2," Boodry said.
Son had said in June that the value of SoftBank's assets has returned to pre-coronavirus levels.