As the Fed tightening cycle arrives, valuations of technology companies in SoftBank’s portfolio have collectively declined in recent months. In the words of CEO 1 Masayoshi Son , this Japanese technology group is in a "blizzard".
is affected by poor investment, and SoftBank's stock price has fallen nearly two-thirds from its high in March last year. According to the Bloomberg Billionaire Index, Masayoshi Son's current personal wealth is about US$13.5 billion, which has shrunk by US$25 billion in the past year.
technology stocks cold winter , SoftBank investment portfolio has suffered huge losses
Previously, the market expected Fed to speed up interest rate hikes . The tightening of interest rate policies has put technology stocks that rely on future cash flow in trouble, and investors are no longer tolerant of the unprofitable high valuation growth technology stocks.
SoftBank continues to raise funds and invest, and the number of companies it holds is increasing like a snowball, covering almost the entire technology field.
SoftBank's Vision Fund focuses on investing in technology startups, such as the Indian version of " Alipay " Paytm, and , and these investment projects have collectively suffered heavy losses in the past few months. Among them, as SoftBank’s largest investment, the share price of Alibaba fell 35% this year.
SoftBank is currently extremely eager for funds, and the Vision Fund sold $1 billion in stock last week in a discount.
It is worth mentioning that SoftBank originally wanted to sell British chip design company ARM to chip manufacturer Nvidia for US$66 billion, unlocked funds for further stock repurchase, However, this "century merger and acquisition" in the chip industry ended in failure due to strong regulatory opposition.
The dilemma faced by Masayoshi Son, the loan value ratio is high
Bloomberg said that Masayoshi Son has been looking at SoftBank's loan value ratio recently, and this indicator is divided by net debt by the value of the stock he holds.
Masayoshi Son once lost $70 billion when the Internet bubble burst. Later, the loan-value ratio played an indispensable role in it.
However, as the conflict between Russia and Ukraine continues to escalate, inflation is getting higher and higher, Fed rate hike is approaching, and the loan value ratio that Son is most concerned about continues to rise. This means SoftBank's net liabilities relative to its net assets are out of control.
Although SoftBank’s goal is to keep the loan value ratio below 25%, the increase in loan amount and the decline in SoftBank’s share price have led to a further rise this year.
Amir Anvarzadeh, equity strategist at Asymmetric Advisors, Japan, said:
From the investment and listing prospects, SoftBank's situation is not optimistic. The value of the technology company's shares held by SoftBank has reduced, causing the company to face the risk of being margined by and .
Tomoaki Kawasaki, senior analyst at Japanese investment bank Iwai Cosmo Securities, pointed out:
If SoftBank is asked to add margin, investors must be more cautious about the financial risks faced by the company.
On March 7, Bloomberg senior credit analyst Sharon Chen said on a conference call:
is currently calculated with the SoftBank loan value ratio as high as 29% ( S&P Global rating also includes margin loans in the calculation when calculating the loan value ratio), . Once this indicator exceeds 40%, S&P may further downgrade SoftBank's credit rating.
Can Masayoshi Son still "turn over"?
SoftBank has always used financing to maintain investment speed and provide funding for stock repurchase projects. At the same time, SoftBank has long been financing through collateral assets, and the borrowing cost of this model is lower than that of other financing models.
investment bank Jeferies analyst Atul Coyal said last month that he expects SoftBank to need up to $45 billion in cash this year.
It is also worth mentioning that the scale of personal loans Son ranks high in the world. He once mortgaged SoftBank shares worth US$5.7 billion to 18 financial institutions including Swiss Bosen Bank, Ruisui Bank and Yamato Securities.
Although bad news follows one after another, 18 of the 20 analysts interviewed by Bloomberg expressed their optimism about SoftBank's stock.
Redex Research analyst Kirk Boodry said: "We don't see a real crisis."
Not only that, Son is optimistic that the cold winter will end soon. He said in February:
Although SoftBank's portfolio has performed poorly in the past three quarters, there is still some buffering. Spring will come sooner or later, and we will continue to sow, and the seeds are growing steadily.
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