Abu Dhabi, UAEMonday 6 April 2020

SoftBank Vision Fund manager defends investment record

SoftBank Investment Advisers chief executive Rajeev Misra says the company's portfolio 'is doing really well'

SoftBank reported a 92 per cent fall in net profit to 55 billion Japanese yen for the three months to December 31, 2019. Reuters
SoftBank reported a 92 per cent fall in net profit to 55 billion Japanese yen for the three months to December 31, 2019. Reuters

The head of the unit that manages SoftBank’s Vision Fund defended its investment record on the day that its parent company reported a 92 per cent fall in profit due to write downs on some of the deals it has done.

In an interview with Michael Milken at the closing session of the Milken Middle East and Africa Summit on Wednesday, SoftBank Investment Advisers’ chief executive Rajeev Misra said “the portfolio is doing extremely well”.

“We have 88 companies across the globe. We have roughly 50 winners. Of course, we have losers also. The ones that don’t perform well come out visible in the first 2-3 years because the business model didn’t work, the unit economics didn’t work,” he said, citing online generic goods retailer Brandless and dog walking firm Wag as examples. The former announced it was halting operations this week, while SoftBank sold its holding in the latter back to the company at the end of last year.

However, he pointed to the company’s investment in Bytedance - owner of the TikTok social network - as one of its successes. Mr Misra said that its revenue had grown from $7 billion (Dh25.7bn) when SoftBank first invested in 2018 to $16bn last year and an expected $30bn this year based on its current run rate. At the time of SoftBank's investment, the platform was lossmaking but expects to achieve earnings before interest, tax, depreciation and amortisation of $8bn this year.

He also said eight of the companies backed by the fund have achieved listings on public stock markets.

“The public companies that we have invested in are up roughly $4.5bn (Dh16.5bn),” Mr Misra said, adding that its stake in Uber had gained $2.5bn in value since the start of this year.

Softbank is a Japanese conglomerate which has interests in telecoms and technology companies whose $100bn Vision Fund is backed by Saudi Arabia’s Public Investment Fund and Abu Dhabi’s strategic investment firm, Mubadala. It made its first investment in May 2017 and has backed a series of high-profile technology firms including ride-sharing platforms Uber, Grab and Didi Chuxing, chipmaker ARM, business network Slack and property firm WeWork, among others.

It reported a 92 per cent fall in net profit to 55bn Japanese yen (Dh1.84bn) for the three months to December 31 on Wednesday as it reported unrealised losses of 225bn yen relating to Vision Fund investments. Despite this, in a presentation to investors, it said that by the end of last year, Vision Fund 1 was still up by a net $9.5bn in terms of the the uplift in market value and realised gains made in investments to date, despite $7.7bn of markdowns in 31 portfolio companies.

“There’s a lot of latent value - we are marked at carry costs in most of them,” Mr Misra said on Wednesday.

He expects “a dozen or more” of its companies to achieve an IPO in the next 18 months, adding that listings will happen “at the right time”.

“There’s no rush, they don’t need capital. A lot of them won’t even raise capital in the IPO - they’ll do a direct listing to provide liquidity.”

The company has also made seven investments through its second Vision Fund and has “half a dozen in the pipeline”, Mr Misra said.

He said Softbank remained an attractive investor to technology firms because of its brand, the amount of capital it has available and “the long term nature of our capital - we will be partners for the next decade, if required”.

Updated: February 13, 2020 07:29 PM



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