SoftBank Group hit it big with revival in investment gains in FY2021

Following the news on 12 May 2021 that SoftBank posted record US$46bn annual profit as investments surge;

Alisha Bajpai Singh, Analyst at GlobalData, a leading data and analytics company, offers her views:

“Despite a challenging year for global economy, the SoftBank Group’s net profit jumped to JPY4,988bn (US$46bn) in FY2021 from a net loss of JPY961.6bn (US$9bn) in FY2020, mainly ascribed to a drastic increase in the investment gain from investment business of holding companies segment; and revival in the gain from investment in SoftBank Vision Fund 1 (SVF1) and SoftBank Vision Fund 2 (SVF2), and others.

“The merger of T-Mobile US Inc. and Sprint; and related event of the partial sale of T-Mobile shares, which generated a gain of JPY421.8bn, triggered a significant gain on investments at investment business of holding companies by 95.3% to JPY945.9bn.

”During the year, the company monetized JPY5.6 trillion of the assets of T-Mobile, SoftBank Corp, and Alibaba, as a part of its program to sell or monetize JPY4.5 trillion of assets, to repurchase over JPY2 trillion of common stock, strengthen cash reserves, bond buybacks, and debt redemptions.

“The SVF1 and Other SBIA-Managed Funds segment reported an investment gain of JPY6,357.5bn, as compared to an investment loss of JPY1,844.9bn in the previous year, facilitated by a net unrealized gain on valuation for listed portfolio companies, which stood at JPY4,285.1bn for SVF1 and JPY494.1bn for SVF2. Epic listing of Coupang and DoorDash, Inc., stock performance of Uber Technologies, Inc., and increased share prices of KE Holdings and other listed portfolio companies principally accelerated the segment’s gains. The growth is also supported by the booming technology sector and digital adoption due to the COVID-19 pandemic.

“SoftBank Group’s plans to invest in companies using artificial intelligence and its focus on IPOs could further boost its investment gains. It expects favorable outcomes from its investment in Alibaba group. Though the group had certain failed investments such as WeWork, Katerra and Greensill, surge in profits could be considered as a one-time income. Its focus on discovery and analysis, strengthening organization, and prudent financing could encourage it to generate recurring gains.”