SoftBank's Vision Fund back to black even as some of Son's tech bets sting

By Sam Nussey

TOKYO (Reuters) - Japan's SoftBank Group Corp on Monday reported $6.1 billion in quarterly profit as a broad upswing in tech valuations brought its mammoth Vision Fund back into positive territory.

The Vision Fund recovery is likely to be welcome news for investors unnerved by some of SoftBank's recent stumbles, even as overall earnings were tainted by a $1.3 billion hit from bets on technology stocks and derivatives.

Founder Masayoshi Son had long enjoyed a reputation for investing prescience - he was an early backer of Chinese e-commerce giant Alibaba Group Holding Ltd - but that was tarnished after the spectacular flame-out of portfolio company WeWork and missteps during the pandemic.

"I'm not that hung up on the numbers," Son said of the group's earnings at a briefing on Monday, reiterating the company's view that net asset value, not earnings, are the primary measure by which SoftBank should be judged considering its shift away from running businesses to tech investing.

The Japanese conglomerate has been selling down core assets such as stakes in Alibaba and domestic telcom SoftBank Corp to raise cash to weather the COVID-19 pandemic.

It has been parking excess cash from asset sales in tech stocks and derivatives in at attempt to capitalise on an uplift in valuations in the sector.

The investments, which came as SoftBank hoped to reestablish its investing chops after its stumbles, were undone by a 132 billion yen loss on stocks and derivatives in the six months to the end of September.

Some of the bets sparked wide speculation in markets that SoftBank was the so-called "Nasdaq whale", an investor with large derivatives positions in tech stocks.

Son said he was surprised at the speculation.

"I'm not sure if that's praise or disparagement," he told the briefing.

VISION FUNDS

SoftBank reported net income attributable to shareholders of 627 billion yen ($6.1 billion) for the three months through September, versus a loss of 700 billion yen in the same period a year earlier.

It booked a gain of 1.04 trillion yen in the quarter from investments via its two Vision Funds, though much of that typically reflected unrealised profit from portfolio companies. The figure compared with a loss of 944 billion yen a year earlier.

The first fund is now worth some $76.4 billion, slightly north of the $75 billion paid for its 83 investments, it said.

The smaller second fund saw a big uplift following the listing of housing firm Ke Holdings Inc. That fund had a fair value of $7.6 billion versus a total cost of $2.6 billion, SoftBank said.

SoftBank itself is the only investor in the second fund - a move aimed at attracting more investment.

At September-end, SoftBank also held positions worth $16.8 billion in stocks including Amazon.com Inc, Google parent Alphabet Inc and Facebook Inc.

BUYBACKS

SoftBank has also used some of its cash to buy back shares, under a programme that has pushed its stock price to record highs.

However, the persistent gap between SoftBank's market capitalisation and the value of its assets has left frustrated executives mulling plans to take the group private, Reuters reported in September.

Son on Monday said he regularly considers the merits and demerits of being a listed company, but declined to comment on whether a management buyout was in the works.

Last month, a source told Reuters that SoftBank is planning to list a blank-cheque company to attract outside investment to its Vision Fund.

($1 = 103.5100 yen)

(Reporting by Sam Nussey; Editing by David Dolan and Christopher Cushing)