On Tuesday, Japan’s SoftBank Group expected that it would record a return to profit when it reports first quarter profits since its portfolio of technology companies has recovered. The Technology sector holdings in its Vision Fund investment arm saw a recovery, analysts said.
The vision fund portfolio has declined, and the tech investor has posted a loss for the past two years. A portion of its shares were sold to improve its financial standing; they sold its largest shares in Chinese E-commerce company Alibaba Group Holding.
The pressure will be reduced on Masayoshi Son, the founder and CEO of the company, if they can earn some profits again. The company invested extensively in many tech firms, which shocked the tech investing community. The investments were risky bets on late-stage startups. Most of the startups crashed, and the investments underperformed.
Investors are keen on the developments around the portfolio arm’s prospective Spectacular offering, and if it is successful, it would boost the group’s financial situation and enhance Son’s reputation as a Savvy Tech investor.
Analyst Rolf Bulk at News Street Research said, “It’s a major catalyst for the company and a very important event for tech as a whole, considering Arm’s important position in semiconductors.”
According to Refinitiv’s average of four analyst projections, SoftBank is expected to report a net profit of 75 billion yen for the four months of April through June. There were five consecutive quarters of investment losses booked by the Vision Fund unit; this was the result of the crash of high-growth firms they backed, for which the market was not in their favor. This forced them to be more defensive to preserve cash.
Bulk said, “Public valuations in tech are trending up again, and I would expect private valuations to follow suit.” DoorDash, the food delivery company, and Grab Holdings, the ride hailing business, were included in the list of gainers during the quarter.
Analysts predict that a return to profit might signal an increase in new business. Amid enthusiasm about developments in artificial intelligence (AI), Son stated in June that he intends to go into “offense mode.”
Softback has investments in the tech company Tractable and joint ventures to build automated warehouses. Analysts are especially excited about Arm’s potential for growth in the data center and automotive industries. The chipmaker Nvidia, a previous Arm suitor, has already seen its market capitalization increase past $1 trillion due to expectations that investments in AI will spur industry development.
Macquarie analyst Paul Golding said there is an upside potential of $31.4 billion for Arm from its current book value.
New Street Research’s Bulk said, “SoftBank mandated Arm to reinvest all of its profit to enter new markets” . “Arm is now in a phase where they can reap the benefits of that investment.”
