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SoftBank eyes the AI opportunity as it reshuffles the board and puts losses behind

Japan’s SoftBank Group Corp has bounced back as it posted a profit of ¥627 billion (US$6.1 billion) in Q2FY21, compared to a loss of ¥700 billion ($6.6 billion) in Q2FY20. The group’s rebound has been attributed to strategic investments in technology stocks and improvement in the performance of its Vision Fund.

In an earnings call with investors, the company’s chief executive Masayoshi Son said that the investment company which investments in the “information revolution” is looking to expand into artificial intelligence which will be a key focus area, particularly autonomous transportation, banking, healthcare and deliveries.

Son told analysts that the age of computers had developed in six phases: calculate, memorize and search, understand, infer and create. “We used to say whoever rules the mobile net will rule the net….We think whoever rules AI will rule the future,” he said.

“So AI or computer, same as human being, they can — they start understanding things. And it’s not the end. They will infer. It’s not the end at all yet. They will create. So that’s the phase. Actually, those are the actually privilege of human beings, but the computer is now entering into such phase. They have not exceeded or go beyond human being yet, but they are about to exceed part by part,” Masayoshi Son, CEO, SoftBank Group. 

Gains through investment book

The group has monetized ¥4.5 trillion ($42.87 billion) through asset monetisation in Q2FY21 and since April this has monetised investments worth ¥5.6 trillion ($52.2 billion) in T-Mobile, Alibaba and SoftBank Corporation. It made made a gain on investments in holding companies worth ¥580 billion ($5.52 billion). On the other hand, the group took a hit of ¥132 billion ($1.3 billion) on its holdings in technology stocks and derivative contracts. SoftBank holds $16.8 billion in leading tech-stocks like Amazon.com Inc, Alphabet Inc and Facebook Inc and $2.7 billion in options and future positions at the end of September 2020.

In total, the group reduced its debt by ¥1.5 trillion ($14.3 billion)  across the SoftBank Group, loans in its Vision Fund, SoftBank Corporation and Z Holdings Inc. It had announced a share repurchase program worth a total of ¥2 trillion ($19 billion), of which it has repurchased ¥1.2 trillion ($11.4 billion) worth of shares of SoftBank Group till date.

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Vision Fund performance

The Vision Fund made a profit of ¥628 billion ($5.98 billion) in Q2FY21, compared to a loss of ¥700 billion ($6.6 billion) in Q2FY20. Investments made by the Vision Fund have rebounded as the group made a gain of nearly ¥1.34 trillion ($12.76 billion) across the two funds, particularly due to rising share prices of Uber Technologies Inc and Chinese startup, KE Holdings. Son says that though the fund made the biggest loss in its history in March due to issues at WeWork, the fund is now back to profit again.

At the end of September, the fund fully-exited from 10x Genomics, Slack and one undisclosed portfolio company. It saw stock listings of Relay Theraputics and Opendoor Education.

  • Fund 1: The $98.6 billion fund has gained $9.6 billion since inception as of September 2020, against an acquisition cost of $83 billion. It has investments in 83 portfolio companies and has seen 10 stock listings since its inception.
  • Fund 2: The $28.1 billion fund has gained $2 billion since its inception against $24.1 billion paid-in capital.

Reshuffling at the top

The group re-shuffled significant members of its board as part of its corporate governance strategy, it said in a statement. Four internal board members—chief operating officer Marcelo Claure, executive vice-president Rajeev Misra, chief strategy officer Katsunori Sago, and managing director of the Public Investment Fund of Saudi Arabia, Yasir al-Rumayyan—have resigned. The board now has 4 external board of directors and 5 internal board of directors, with Son designated as a representative director.

“We’re going to change the management structure in order to strengthen corporate governance, which has been one of the biggest hot topics around the world, especially Masa. So you have to increase our corporate governance and you need to increase the percentage of external directors than internal directors….So what we’re going to do is to separate management and execution function to strengthen its corporate governance so that we have a clear distinction between Board of Directors and corporate officers.” — Masayoshi Son

Download: Financial Results | Presentation |  Transcript

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