On February 12, SoftBank Group announced its third quarter financial results for the fiscal year ending March 2020. Sales were down 1.1% year-on-year to ¥ 7.898 trillion, and operating profit was ¥ 12.9 billion, the second consecutive operating loss.
However, at a financial results briefing held on the same day, Masayoshi Son, Chairman and CEO of the company, said that the tide has changed. One of the reasons is that the merger of the US telecommunications subsidiaries Sprint and T-Mobile has won the merger injunction in several US states and the merger is in its final stages.
Mr. Son of SoftBank Group speaking at financial results briefing
In response, Sprint's stock has risen nearly 70% in one day. For the SoftBank Group, Sprint, which had been suffering from heavy debt and continued slump, has long had a negative impact on business results. With that in mind, the merger with T-Mobile is promising, and the need to take into account Sprint's debt has a major impact on business results.
With the approval of the U.S. District Court, the merger of Sprint with T-mobile has made significant progress and has entered the final phase.
The second is that the stock prices of the companies invested by SoftBank Vision Fund, which is managed mainly by the company, are recovering. In the first quarter, the reason why the SoftBank Group slipped into the red in the first quarter was mainly due to the slump in investee companies such as the management crisis at Wework and the slump in Uber stock prices. However, according to Mr. Son, of the 88 companies invested in this quarter, 38 companies with valuation and realization gains totaled 1.9 trillion yen and 31 companies with valuation losses totaled 0.8 trillion yen. Explain that the company has a 1 trillion yen return on investment.
It is said that the sum of the valuation gains of Softbank Vision Fund investee companies is 1 trillion yen profit
In addition, the company's operating income has dropped sharply from 97.3 billion yen to 225.1 billion yen due to an increase in the stock price of the listed investee company during the quarter. According to the company, "Market capitalization has risen by about 300 billion yen in a month." On February 11, the day before financial results were announced, consolidated operating profit turned profitable.
Listed companies funded by the SoftBank Vision Fund are seeing a recovery in share prices, led by Uber, and their market capitalization has increased by about 300 billion yen at the time of the briefing.
However, this does not mean that the problem of Wework has been solved. So Mr. Son explained his latest work on Wework. As the market for co-working space itself is growing, we will set a clear milestone for another five years and provide about 580 billion yen for the necessary funds. In addition, he is confident that he will be able to make a comeback with the new CEO, Sandeep Masarani, who has a track record of restructuring in the real estate industry.
Regarding Wework, which was the main cause of worsening business performance, we will rebuild plans by reviewing plans, investing funds, changing CEO, etc.
The third is that profits are in the red and shareholder value is rising. Since becoming an investment company, the SOFTBANK Group has indicated that it will use shareholder value as an indicator of how much it can return to shareholders, rather than operating profit, which is emphasized by operating companies.
ソ フ ト As of the end of September 2019, the previous quarter, the value of the shares held by the SoftBank Group was 26 trillion yen, and minus 20 trillion yen of net interest-bearing debt was deducted from that value to be 20 trillion yen. On the other hand, as of February 12, 2020, the value of shares held is 31 trillion yen, and interest-bearing debt minus 6 trillion yen, which is 25 trillion yen as shareholder value. The yen has increased. "
Shareholder value has increased by 5 trillion yen compared to the previous quarter at the time of earnings announcement, and it is growing steadily
Furthermore, the investment company SoftBank Group explained that "sales and profits are not relevant to the investor. It may be important to measure whether the value of the stock held increases or decreases." Profits are in the red, but maximizing investor-focused shareholder value is key to the company's performance.
Sun ranks operating profit with shareholder value and explains that shareholder value is more important for the company as an investment company.
投資 Investing in the future of the SoftBank Group, which emphasizes shareholder value, is becoming more important when investing, more specifically, launching the second SoftBank Vision Fund. The company has already announced the launch of its second fund and has said it has raised $ 108 billion on a memorandum basis.
However, at the results briefing, Mr. Son replied, "We think we should reduce the scale a little, including various reflections," in response to issues such as Wework. The contract for the second fund was once deferred, a small fund was launched, invested in a short period of one to two years, and after achieving results and gaining a sense of security from the investing company, He said he was considering rolling out a fund.
With regard to the SoftBank Group, Elliott Management, known as a “speaking shareholder”, acquired nearly $ 2.5 billion in the company in February 2020, and purchased up to $ 20 billion [approximately ¥ 2.2 trillion] of its own shares. And increasing the number of outside directors and demanding disclosure of information on the SoftBank Vision Fund.
Mr. Sun reportedly met with the Elliott Group management about two weeks ago and exchanged opinions, explaining that his basic policy was "consistent with my opinion." The three initiatives mentioned above will be studied in the future. He also told shareholders, "I think that both shareholders who speak and those who do not have the same concern."