Vision Fund's investment earns big profits, SoftBank achieves quarterly profit for the first time in a year.

Thanks to the rebound in the value of the Vision Fund's stock holdings and a windfall from T-Mobile US Inc. stocks, SoftBank Group has returned to profitability after four consecutive quarters of losses.

On Thursday, February 8th, SoftBank Group released its third-quarter financial report for the period from October to December 2023.

According to the report, SoftBank's net profit for the fourth quarter of last year was 950 billion yen ($6.4 billion), reversing the loss of 783 billion yen in the same period of the previous year. This is the first quarterly profit for SoftBank since September 2022.

During the same period, the Vision Fund of SoftBank achieved a profit of 422.74 billion yen in the third quarter, compared to a loss of 660.10 billion yen in the same period of the previous year.

In addition, despite market volatility, SoftBank maintained its forecast for annual dividends, expecting 44.00 yen per share, in line with market estimates.

Vision Fund turns losses into profits, stock valuations rebound

The Vision Fund achieved a profit of 422.7 billion yen in the current period, compared to a loss of 660.1 billion yen in the same period of the previous year. Among the stocks that contributed to the performance of the Vision Fund, DoorDash Inc., AutoStore Holdings Inc., and Symbotic Inc. showed the strongest growth.

At the same time, SoftBank's financial report pointed out that the increase in the fair value of ByteDance, the parent company of TikTok, also played a helpful role, and the value of Didi stocks rose 22% in over-the-counter trading, which also contributed to the growth.

As of the end of the third quarter, the number of stocks invested by SoftBank's Vision Fund 1 decreased by 5.5% compared to the previous quarter, with a total of 69 stocks. The number of stocks invested by SoftBank's Vision Fund 2 remained the same at 273.

Kirk Boodry, an analyst at Astris Advisory, pointed out:

Stable performance may indicate a better future. We are not overly optimistic about the current investment portfolio. Key investment targets such as ByteDance and the US online sportswear store Fanatics may go public in 2024.

However, there are still doubts about the hundreds of privately held startups under the Vision Fund. Vision Fund 2, which is fully funded by SoftBank, has suffered losses due to the global tech stock valuation decline during the economic recession after the pandemic.

T-Mobile's rise brings windfall for SoftBank

Meanwhile, according to an agreement reached between SoftBank Chairman and CEO Masayoshi Son and T-Mobile before T-Mobile's acquisition of SoftBank's subsidiary, Sprint Corp., in 2020, SoftBank received nearly $8 billion worth of T-Mobile stocks, totaling over 48 million shares. This turned out to be an unexpected windfall for SoftBank.

This transaction took place when T-Mobile acquired its competitor and SoftBank's former subsidiary, Sprint Corp., in 2020. As part of the agreement reached at the time, SoftBank will receive more T-Mobile shares if the T-Mobile stock price rises above a certain level during a specific period.

In addition, the stock price of Arm Holdings Plc, the chip design subsidiary that went public last year, rose 40% in the fourth quarter, further boosting SoftBank's performance. As the shareholder holding approximately 90% of the company, SoftBank may use Arm to raise funds for new investments.

On Wednesday, Arm provided optimistic profit guidance that exceeded expectations, achieving results in more profitable areas such as smartphones, servers, and data centers. Its stock price soared 41% in after-hours trading, pushing its market value to nearly $100 billion.

This allowed SoftBank, under the leadership of Masayoshi Son, to earn more money in the Arm transaction than the $14.3 billion it lost in the bankrupt WeWork. As the stock price rose, the value of SoftBank's stake as a major shareholder in Arm increased by nearly $16 billion, from nearly $71.6 billion to $87.4 billion.

SoftBank's stock price surged 11% in Thursday's trading, reaching its highest closing level since July 2021.