SoftBank's Vision Fund Drives Q2 Profit

SoftBank Group Corp (OTC: SFTBY) reported a staggering 253.1% year-over-year growth in net income to ¥1.87 trillion (roughly $18.1 billion) for the six months ended September 30, 2020.

Reported quarterly profit for the second quarter of the fiscal year 2021 was $12 billion, against a $13 billion loss in the year-ago period — CNBC.

In October 2020, SoftBank followed through with its share repurchase program to buyback around ¥139 billion (roughly $1.34 billion) worth of shares. Since the beginning of the fiscal year, SoftBank has repurchased an aggregate of 26 million shares valued over ¥179.4 billion ($1.73 billion).

SoftBank’s Vision Fund Highlights: The resurgence in SoftBank’s profit is attributed to valuation gains in its Vision Fund investments — SoftBank Vision Fund I (SVF1) and SoftBank Vision Fund 2 (SVF2). Both funds collectively generated ¥1,336.6 billion (approximately $12.6 billion) from realized and unrealized gains on investments.

At the end of the quarter, SVF1 held 83 investments with a fair value of $76.4 billion, and SVF2 held 13 investments at a fair value of $7.6 billion. Historical costs for these investments were $75 billion and $2.6 billion, respectively.

SVF1 offloaded investments in six companies for $3.05 billion, initially acquired for $1.73 billion in 1H 2020.

SVF1’s follow-on investments in portfolio companies and joint ventures totaled $1.70 billion, while SVF2 invested $0.64 billion during the period.

At the end of Q2 2021, SVF1 has a total committed capital of $98.6 billion, of which $33.1 billion was met by SoftBank Group and the balance by third-party investors. SVF2 has $5 billion in committed capital, entirely funded by the company.

In October, SoftBank contributed an additional $5 billion in capital to SVF2, raising the total committed capital threshold to $10 billion. No third-party investors are part of the SVF2 at the time of reporting.

SVF1 and SVF2 Portfolio: SVF1 portfolio of 83 active investments comprises seven listed and 76 unlisted companies. SVF1’s value increased primarily by investments in health-tech, followed by investments in consumer companies.

The valuation of ride-sharing Uber Technologies Inc (NYSE: UBER) increased to $8.1 billion, $0.4 billion higher than the investment cost. Uber stock jumped 7.22% on Friday.

SVF1 exited nine investments for a cumulative realized gain of $4.5 billion, of which $1.3 billion was realized in Q2.

SVF2’s portfolio includes KE Holdings Inc (NYSE: BEKE) and twelve unlisted companies. Although the unlisted companies were valued at par, investments in KE Holdings was upvalued to $6.4 billion, from its historical cost of $1.4 billion. BEKE stock closed 3.98% higher on Friday.

Price Action: SFTBY ADRs closed 0.58% higher to $32.80 on Friday.

Image Courtesy: Wikimedia