SoftBank’s big bet on listed tech stocks cost it $1.3 billion

SoftBank, the Japanese conglomerate founded by Son, on Monday posted losses of 131.7 billion yen ($1.3 billion) “from investment in listed stocks and other instruments” for the six months ended in September.

The Wall Street Journal and the Financial Times reported on Son’s big bets in September. The Journal said that SoftBank had bought roughly $4 billion worth of options tied to underlying shares it had earlier purchased in companies such as Amazon (AMZN), Microsoft (MSFT) and Netflix (NFLX), generating an exposure of about $50 billion.

Some observers called the SoftBank founder and CEO as a Nasdaq “whale” — a heavy hitter with the power to move markets on his own.

Son dismissed the description on Monday, describing SoftBank’s latest strategy of investing in highly liquid, blue chip companies and derivative products as “a pilot program.”

“When you say derivatives, it sounds very risky, but it’s only 1% of the total value of our holdings,” he said through a translator at the company’s earnings presentation. If the investments fail, “the damage is only 1%-2% [of SoftBank’s total equity holdings], so just a tiny fraction of the whole picture,” he added.

And Son can tout investment gains elsewhere.

The Vision Fund, SoftBank’s massive tech investment vehicle backed by Saudi Arabia, is back in the money again. Its investments in 83 companies, which cost $75 billion, were worth $76.4 billion at the end of September, the company said.

The fund also booked gains of 141.4 billion yen ($1.4 billion) for the six months that ended in September after it sold shares in four companies and cashed out of six others, SoftBank said in a filing. The filing did not disclose which companies the fund exited.

The smaller Vision Fund 2, meanwhile, posted unrealized gains on investments of 537 billion yen ($5.2 billion), and recorded another 537 billion yen ($5.2 billion) gain due to an increase in the share price of a company that went public in August.

SoftBank shares dive on reports that Masa Son has been betting big on tech stocks

SoftBank also reported net income of 627 billion yen ($6 billion) for the July-September quarter, reversing losses of 700 billion yen ($6.8 billion) suffered in the same period last year. The latest earnings report did not disclose operating profit. SoftBank dropped the profit measure after its increasing focus on tech investments left the metric battered at times by paper revaluations.

Shares in SoftBank (SFTBY SOFTBANK) closed up 5.4% in Tokyo before earnings were released, outperforming the broader Nikkei 225 (N225).
Share buy backs, fueled by a roughly $40 billion fire sale in assets, have helped push SoftBank’s stock to a near 20-year high, giving the company a market value of 14.8 trillion yen ($143 billion).

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