9984 - Softbank

[Liberty]

Lots going on here right now ... stupid massive option trade ... but it looks like they might sell ARM for $40b.  Still deeply discounted to NAV.  Thoughts?

 

Considering they paid 32 billion for ARM in 2016, and in 2016 Nvidia had a similar market cap to ARM, I'd say both companies have had pretty different trajectories..

[Spekulatius]

Lots going on here right now ... stupid massive option trade ... but it looks like they might sell ARM for $40b.  Still deeply discounted to NAV.  Thoughts?

 

Considering they paid 32 billion for ARM in 2016, and in 2016 Nvidia had a similar market cap to ARM, I'd say both companies have had pretty different trajectories..

 

The ARM acquisition was certainly a failure, as the revenues haven’t risen much and earnings evaporated. It looks like a deal due to rising tech valuations bails SoftBank out, similar what happened with the Sprint sale.

It’s a big positive for SoftBank unless they make another dump acquisition with proceeds.

[fareastwarriors]

Embattled SoftBank renews talks on taking the group private, FT reports

 

https://www.reuters.com/article/us-softbank-group-private/embattled-softbank-renews-talks-on-taking-the-group-private-ft-reports-idUSKBN2640TM

[fareastwarriors]

SoftBank Group to sell U.S. cellphone distributor Brightstar in latest asset sale

 

https://www.reuters.com/article/us-softbank-group-divestiture/softbank-group-to-sell-u-s-cellphone-distributor-brightstar-in-latest-asset-sale-idUSKBN2690A1

 

Brightstar could be valued at more than $1 billion, the people said.

 

SoftBank said in a statement it would sell the firm to a newly formed subsidiary of private equity firm Brightstar Capital Partners for cash as well as a 25% stake in the subsidiary. Brightstar Capital is not an affiliate of Brightstar Global, the statement said.

[ValueMaven]

Yes - I saw that.  Thank you for posting.  Still trading well below its equity stakes + operating biz it owns.  The market doesnt believe Masa's plan, and continues to think he will act irrationally.  Still, he has raised nearly $75B in asset sales over the past 3 months.  IVe been waiting for a pull-back to start a position here - but it hasnt happened yet. 

[Spekulatius]

Yes - I saw that.  Thank you for posting.  Still trading well below its equity stakes + operating biz it owns.  The market doesnt believe Masa's plan, and continues to think he will act irrationally.  Still, he has raised nearly $75B in asset sales over the past 3 months.  IVe been waiting for a pull-back to start a position here - but it hasnt happened yet.

 

The ARM sale was just n set swap against richly valued NVDA stock. It remains to be seen how this works out. We don’t know the deal conditions either and if he negotiated a price floor.

[Xerxes]

Yes - I saw that.  Thank you for posting.  Still trading well below its equity stakes + operating biz it owns.  The market doesnt believe Masa's plan, and continues to think he will act irrationally.  Still, he has raised nearly $75B in asset sales over the past 3 months.  IVe been waiting for a pull-back to start a position here - but it hasnt happened yet.

 

ValueMaven

 

You cannot wait for a pullback on an absolute sense for a name like this only in relative terms vs. sum of the parts.(I.e. widening of spread is your pullback).

 

If you are waiting for a pull back on an absolute sense, you are really waiting for pull back on Alibaba. 

[ValueMaven]

No disagreement there.  But their stake in BABA only is worth $160B vs. Softbank of $110B - plus you get all sorts of various odds and end investments.  I get it - there is a serious Masa discount here.  But what if the company is really turning from a governance perspective?!  There was an interview in Barron's this weekend from the Saudi Investment Fund - he had some interesting things to say re: Softbank/Masa/Vision Fund.   

[sagiv131]

All the share pledges, both company and personal for Masa, make me wonder whether the balance sheet tells the real story there or we're missing a ton of off-BS items and, like Alibaba, debt and liabilities that are just pushed onto subsidiaries that are impossible to see. Seems pretty difficult to unravel; props to Elliott for trying but without the level of detail they probably have I don't see how this becomes 'obviously undervalued' for most investors.

[Xerxes]

Thanks just read that interview on Barrons.

If you are interested the head of PIF had interview with David Rubenstein on Bloomberg few months ago.

 

With IPO of Softbank Mobile in Dec 2018, and the merger of Sprint and T-Mobile and Softbank position being shifted from a strategic investor to a financial investor in the combined company (a diminishing one at that), and the rise of Vision Fund(s), that should have garnered a asset manager valuation for Softbank as oppose to telecom company.

 

Thanks to the implosion of WeWork (even Saudis were like, dude we can buy real estate ourselves, we don't need SVF to buy that with technology multiples and charge us management fee), Softbank is not getting that asset manager valuation based on a stream of steady management fee and lumpy return on the carry (ala Blackstone or Brookfield). I think the pendulum was swinging toward that goal but got stuck as the flow of third party capital went down to zero.

 

Now, with the asset manager side of the business not getting credit, I think Softbank is just being valued for what it is, a heavily discounted sum of equities and a financial investment. The core cash flow engine which was Softbank Mobile was supposed to be replaced by Vision Fund and its successor funds. So that cash-generating operating business is not there ... or is there but not performing.

 

Softbank is a great story to follow I think. I find Masayoshi Son fascinating. Was an investor from the week he bought ARM in 2016 and sold right before Uber's IPO and invested the proceeds in Tencent, which has close to 700 equity investments, I believe, but more importantly it has a "core" cash flow generator. That is what I am after. For BRK and FFH, that is their insurance business, for BAM and BX, that is their third-party capital inflow. Softbank doesn't have that. You can basically build a synthetic Softbank by combining separate investments in Alibaba, Uber, Didi*, Nvidia, T-Mobile, Slack and add a few call options to make it volatile, Masa-style. i.e. an investment in the equity of Softbank is not getting you anything unavailable in the market.

 

So unless one is playing the long-short sum of the parts strategy to bet on that spread closing, in my opinion, that entity is not investable. 

* Didi is private, but you get that when you buy Uber, anyway

 

Softbank and Berkshire have one thing in common though, they both have a $1 billion bet on Amazon.

[Xerxes]

Awesome read on Softbank

 

https://www.wsj.com/articles/masayoshi-son-softbank-elliott-management-11605069825?mod=searchresults_pos4&page=1

 

i have to say, between all the famed institutional investors, the one that I believe navigated the crisis really well is Masa Son, with the hand he had going in. I am still not interested in investing in it, unless it is a long-short position against the sum of the parts undervaluation. Last week, i thought i saw a day when Alibaba went down but Softbank not much. Maybe it is moving away in being an Alibaba tracker.

 

Interestingly enough, the company looks very different post-coronovirus as it is moving away from 300-year vision to day trading in the options market.

[Xerxes]

Not bad ....

https://www.wsj.com/articles/doordash-is-set-to-deliver-softbank-a-big-hit-11606906803?mod=searchresults_pos8&page=1

 

"At the midpoint of DoorDash’s expected share price range, SoftBank’s $680 million investment would be worth $5 billion. SoftBank, which first invested in DoorDash in early 2018, is its largest shareholder, with a 24.9% stake.

 

When SoftBank first invested in DoorDash, the startup had struggled to cobble together an earlier investment round, and was far behind competitors Grubhub Inc. and Uber Eats in the U.S.—battling with Postmates for fourth place.

 

SoftBank pumped in $280 million, part of a $580 million round with other investors including Sequoia Capital, a main funder of DoorDash since its early days. The $580 million was more than twice what DoorDash had raised in its entire existence, and set the stage for SoftBank to invest a further $300 million over three subsequent funding rounds.

 

SoftBank executives “deserve credit for understanding why DoorDash was thriving and would ultimately prevail when virtually all other investors misunderstood,” said Keith Rabois, one of DoorDash’s earliest investors.

 

Still, DoorDash’s dominance has held back Uber’s stock price, analysts and investors say. It is a double-edged sword for SoftBank: While it is profiting from DoorDash’s success, it is also Uber’s largest investor. It holds more than 12% of the ride-hailing giant, a stake worth over $11 billion.

"

 

I said it before, very impressed by how well Masayoshi got his act together.

He cannot undo the fiascos of SVF, i.e. throwing money at his investees to burn capital and compete each other on a race to the bottom or WeWork or the famed on-demand dog-walking app Wag Labs

 

I wont own DoorDash but happy to own Uber

[ValueMaven]

Masa gave a very interesting interview recently....While I have never invested in Softbank - back in March - during the crash, this thing got cheap! There is still an extreme discount here - which will likely remain given his behavior etc.  With that said this interview is extremely inspiring. 

 

[fareastwarriors]

Should've held on when all their bets look like sh!t.  :-[

 

 

https://www.reuters.com/article/us-softbank-group-results/softbanks-son-hails-golden-eggs-as-vision-fund-rallies-idUSKBN2A80G9

 

SoftBank's Son hails 'golden eggs' as Vision Fund rallies

[Xerxes]

Although the optics may have suggested that the fault was largely due to that of investments and picks in VF, i think the real albatross was Sprint. And getting Sprint off its balance sheet brought in a lot of much needed oxygen. VF was always a leveraged asset management play (playing with other third party fund).

 

I had flipped all of my gain in Softbank to Tencent back in 2018.

i think the latter is a better play.

[Xerxes]

Wow just wow

 

Softbank's SVF scored $33 billion unrealized gain with Coupang IPO.

Yes unrealized paper gain and yes it has 37% ownership that comes with an overhang.

 

But still.

 

The pandemic and the subsequent technology boom helped Softbank like no other.

But credit goes to Masayoshi for getting rid of the albatross on his balance sheet: Sprint.

 

The fact that Softbank no longer moves as a Alibaba "tracker" is clearly an indication that he has done it again.

 

[lnofeisone]

Interesting read - https://constructionphysics.substack.com/p/another-day-in-katerradise. I read another comment equating Katerra to Webvan. Good idea but a decade too early.