Tepid Response To Uber IPO Results In SoftBank Losing $9b Market Value

On Thursday, as his company booked a $3.8 billion gain from its stake in Uber Technologies Inc., Masayoshi Son told SoftBank Group Corp. investors that their time had finally come. Instead, they’re still waiting.

The day after Son’s earnings presentation, SoftBank slid 5.4% and fell again on Monday, as dropping as much as 4.9%. Uber’s initial public offering was a flop with shares sliding on the first day of trading, at the same time the US and China escalated tensions over their trade dispute. SoftBank has lost about $9 billion in market value despite reporting last week that profit more than tripled thanks to the valuation gain from its stake in the U.S. ride-hailing giant.

Son has been remaking SoftBank Group from primarily a telecommunications operator into a technology investment firm, and his $100 billion Vision Fund has begun to show promise as a major contributor to earnings. SoftBank’s stock had rallied almost 60% this year ahead of the earnings. But the slide in the past two trading days shows SoftBank will also now be vulnerable to the bad news from Son’s investment portfolio, as well as the good.

Uber opened at $42, or 6.7% below its $45 IPO price. Shortly after, it slid to $41.06. While the company briefly reclaimed almost all its losses by early afternoon, the comeback proved short-lived.

“Uber debut didn’t quite live up to the expectations, and that’s why some investors are selling,’’ said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “It’s too early to tell how sensitive SoftBank will be to Uber’s price moves going forward. But even if they fall some, that doesn’t have a direct impact on Vision Fund profits.”

The Vision Fund and SoftBank’s own Delta Fund contributed 1.26 trillion yen ($11.5 billion) to profit in the fiscal year ended March 31, or slightly more than half of the total. Investments in 29 companies showed an increase in fair value, while 12 reported a decline.

In addition to Uber, SoftBank also booked a 203.4 billion yen valuation gain from its stake in Guardant Health Inc., which went public in October, and a 154.2 billion yen gain on India’s Oyo. It also recorded a 222.6 billion yen loss due to the share price decline in Nvidia Corp.

Bloomberg