The joy of posting strong financial results was short-lived for investors of SoftBank as the company’s stock price slipped by more than 14% in the past few days of trading.
On May 9, Masayoshi Son, CEO of SoftBank, announced that the Japanese conglomerate had increased its annual operating profit by 80.5%. However, after Uber’s IPO got off to a shaky start on May 10, SoftBank’s market value fell by close to $9 Bn.
Uber got listed on the New York Stock Exchange on May 10 at a price of $45 a piece and on the first day of trading, closed at $41.57. On the second day of trading, Uber’s share further slid down to $37.25 shaving Uber’s valuation to $62.2 Bn from a pre-IPO valuation of $72 Bn. The SoftBank-backed ride-hailing major has so far failed to garner investor confidence. Industry watchers argue that the company, which heavily subsidises rides on its platform, will not be able to turn profitable.
While SoftBank booked a $3.8 Bn gain from its stake in Uber, the company’s share price slid 5.4% on Friday and again slipped 4.9% on Monday. The stock continued slipping for a third day on Tuesday. In all, the stock lost 14.5% on the Tokyo Stock Exchange.
SoftBank’s shares which were trading at 11,549 JPY ($105.3) slid to 10,925 JPY ($99.63) on May 10. The stock further tumbled and by the closing bell on Monday, the stock settled at 10,570 JPY ($96.4). But this was not the end for SoftBank’s decline in value, the stock opened further lower today at 9,901 JPY ($90.3).
Prior to Uber’s debut, only four out of 60 companies of more than a billion dollar which went with their IPOs saw their value declining more than 5% since the beginning of the decade.
Startups Buoy SoftBank’s Balance Sheet
Uber, as well as other startups funded by SoftBank’s $100 Bn Vision Fund (SVF) are also a major source of revenue for the Japanese conglomerate. Proceeds from the stake sale of Flipkart which helped SoftBank earn $3.78 Bn was also recorded into this financial year.
The Masayoshi Son-led company attributed this growth to an unrealised gain of about $12.5 Bn ( or ¥1,378.6 Bn) from its investments in ride-hailing company Uber, Indian hospitality company OYO and other portfolio companies.
Overall, its investments in Flipkart and OYO paid off with a gain of $2.7 Bn, split between realized and unrealised gains.
The sale of Softbank’s share in the Indian ecommerce giant Flipkart resulted in a gain of $1.3Bn (¥146.7Bn ) for the Japanese company. Flipkart was acquired by Walmart for $16Bn in August 2018. OYO’s valuation has increased to $1.4Bn (¥154,189 Mn) in FY 2019.