Signage at a SoftBank Corp. store in Ginza district, Tokyo, Japan.
Kiyoshi Ohta | Bloomberg | Getty Images
Japanese tech investor SoftBank Group Corp is expected to slip back into the red when it reports earnings on Monday, although tech stocks include Arm Holdings Its core assets performed well during the quarter.
Analysts and investors are also eagerly awaiting clues about new growth investments, as SoftBank has ample liquidity to monetize its huge Arm holdings.
Shares in Britain’s Arm, 90% owned by SoftBank, roughly doubled in February as strong earnings results got investors excited about Arm’s expected gains from embracing generative artificial intelligence (AI), but shares did not No rise.
SoftBank’s other listed assets had mixed performance this quarter – stocks Cupang and door panel rose but Didi Global and Grab Holding fall down. The initial public offering (IPO) market remains sluggish, and analysts are uncertain about the monetization prospects of SoftBank’s portfolio of unlisted technology startups.
SoftBank is expected to post a net loss of 72 billion yen ($462.7 million) from January to March, according to the average of two analysts polled by London Stock Exchange Group (LSEG), compared with a net profit in the previous three months. is 985 billion yen.
SoftBank management said it is ready to make new growth investments, but emphasized that it will take a cautious approach.
There was little new investment in the October-December quarter, but analysts say a large holding acquisition – like the $32 billion acquisition of Arm in 2016 – could be imminent.
SoftBank could raise up to $30 billion by combining liquidity on hand through the end of 2023, proceeds from a bond issued in March and margin loan negotiations for its Arm stake, according to calculations by Nomura credit analyst Shogo Tono.
But while Arm’s stake may make an investment of this size possible, its dominant position in SoftBank’s portfolio poses risks if market sentiment shifts, hitting SoftBank’s value and ability to raise capital.
Currently, Arm is valued at a significant premium over its competitors, e.g. Nvidia That makes it almost half of the value of SoftBank’s stake.
Some analysts warn this is unsustainable. Morningstar analyst Javier Correonero estimates Arm’s fair value at $57 per share, compared with recent trading ranges of around $100 per share.
Investors were disappointed by Arm’s annual revenue forecast in its quarterly earnings on Wednesday, sending its shares tumbling as low as 8.5% the next day, underscoring the risk of a steep re-rating.
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