Business / Corporate

Days after announcing tripling of profits, SoftBank market value slides $9 billion as Uber IPO flops

Bloomberg

Last Thursday, as his company booked a $3.8 billion gain from its stake in Uber Technologies Inc., Masayoshi Son told SoftBank Group Corp. investors that their time had finally come. Instead, they’re still waiting.

The day after Son’s earnings presentation, SoftBank slid 5.4 percent and fell again Monday, dropping as much as 4.9 percent. Uber’s initial public offering was a flop, with shares sliding on the first day of trading, at the same time the U.S. and China escalated tensions over their trade dispute.

SoftBank has lost about $9 billion in market value despite reporting last week that profit more than tripled thanks to the valuation gain from its stake in the U.S. ride-hailing giant.

Son has been remaking SoftBank Group from primarily a telecommunications operator into a technology investment firm, and his $100 billion Vision Fund has begun to show promise as a major contributor to earnings.

SoftBank’s stock had rallied almost 60 percent this year ahead of the earnings. But the slide in the past two trading days shows SoftBank will also now be vulnerable to the bad news from Son’s investment portfolio, as well as the good.

Uber opened at $42, or 6.7 percent below its $45 IPO price. Shortly after, it slid to $41.06. While the company briefly reclaimed almost all its losses by early afternoon, the comeback proved short-lived.

Before Uber’s debut, out of a total of 60 companies, only four IPOs of a billion dollars or more had a decline of at least 5 percent since the start of the decade. Only seven ended the first day of trading in the red.

For now, the story is set to be one of volatility as traders dump equities and other riskier assets. The weekend’s back-and-forth between Trump and China suggested U.S. Treasuries and currencies such as the yen and Swiss franc will be seeing a lot of action.

“Uber debut didn’t quite live up to the expectations, and that’s why some investors are selling,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “It’s too early to tell how sensitive SoftBank will be to Uber’s price moves going forward. But even if they fall some, that doesn’t have a direct impact on Vision Fund profits.”

The Vision Fund and SoftBank’s own Delta Fund contributed ¥1.26 trillion ($11.5 billion) to profit in the fiscal year ended March 31, or slightly more than half of the total. Investments in 29 companies showed an increase in fair value, while 12 reported a decline.

In addition to Uber, SoftBank also booked a ¥203.4 billion valuation gain from its stake in Guardant Health Inc., which went public in October, and a ¥154.2 billion gain on India’s Oyo. It also recorded a ¥222.6 billion loss due to the share price decline in Nvidia Corp.

In a related development, the Vision Fund is injecting $800 million into U.K. finance group Greensill, according to a person familiar with the matter.

The investment values Greensill, which provides alternative supply chain funding to companies, at $3.5 billion, the person said. That’s more than double the level of almost a year ago, when the firm received $250 million from General Atlantic LLC. Greensill declined to comment, while SoftBank couldn’t immediately be reached for comment.

Greensill estimates the largely untapped market for working capital finance at $55 trillion. The money from Vision Fund will help it accelerate its expansion and develop new technologies to make more capital accessible to its clients, the person said. It will also speed up its recent entry into Brazil as it advances plans to enter other markets, including China and India.

Greensill, co-founded in 2011 by ex-Morgan Stanley banker Lex Greensill, is taking on traditional banks, which typically offer working capital finance to a limited number of large clients. Since 2015, the company has delivered annual growth of more than 100 percent.