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Possible MBO on the cards
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By Jenny McCall
11:00, 10 August 2022
These are troubling times for Japanese conglomerate and tech investing company Softbank Group (SFTBY). The group announced on Monday a $23.4bn (£19bn) loss between April and June, according to reports. This is the most significant loss the company has made to date and caused SoftBank’s share price to plummet by 7% on Tuesday.
The dream investments that the CEO of Softbank (SFTBY) Masayoshi Son has made over the years have officially turned into a nightmare, as the group grapples with recession worries and interest rate hikes.
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“When we were turning out big profits, I became somewhat delirious, and looking back at myself now, I am quite embarrassed and remorseful,” Son announced at a press conference on Monday.
The CEO also said that the company’s venture capital fund, Vision Fund will be making some big changes over the next few months and focus will be made on being more selective with investments.
Over the last six years, Vision Fund has supported over 400 startups worldwide, however, SoftBank approved only $600m of these investments between April to June, this is a 97% drop in spending versus the same quarter last year.
Son said: “I have no choice but to cut a significant number of employees at the Vision Fund.”
The company is also considering a management buyout (MBO), which would see he company’s existing leadership team working together to purchase either the total or majority stake in the business.
SoftBank (SFTBY) owns a host of companies – which include but are not limited to – cloud computing and data center company, IDC Frontier Inc., digital contents business, publishing, and production business, SB Creative Corp and telecommunication services, BB Backbone Corporation.
Analysts are speculating as to whether SoftBank ((SFTBY) will remain a listed company. Several reports have surfaced lately that indicate that CEO, Son is discussing the option of SoftBank going private. SoftBank has looked at this several times over the last three years, mainly because of pressure from the company’s big Japanese lenders, such as Mizuho.
UK Semiconductor company ARM, which was acquired by SoftBank (SFTBY) in 2016, is working towards an initial public offering (IPO). Some reports claim this has now been put on hold by SoftBank, however, analysts have said that once the listing takes place things will change for SoftBank (SFTBY).
In a note to investors on Monday, SMBC Nikko analyst Satoru Kikuchi said that once the listing of Arm is complete SoftBank (SFTBY) would be a pure investment company and a fundraising vehicle.
“We think changes in the very form of the company, for example an MBO, could be coming in the not-too-distant future,” said Kikuchi. “It is raising these funds with debt, so there is little reason to be listed on the stockmarket.”
On Monday SoftBank (SFTBY) reported its largest-ever quarterly loss, $23.4 billion, which was driven by poor performance of its tech investments and a weak yen.
SoftBank (SFTBY) is a multinational conglomerate company, with headquarters in Minato, Tokyo. The group focuses on investment and invests in companies that operate within the technology, energy and financial sectors.
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