The Japanese conglomerate SoftBank, run by Masayoshi Son, is among the world’s “biggest and most controversial” technology firms, say Matthew Field and Hasan Chowdhury in The Daily Telegraph. While it is known to focus on “young, privately-held companies”, SoftBank is now revealed to have made large bets on publicly-traded tech companies too.
It purchased $4bn of call options on tech firms. These instruments, which allow it to buy a stock at a certain price, turned the firm into a “whale”: an investor so large they automatically drive the market up if they make a purchase.
SoftBank may claim to have made $4bn in paper profits from its unusual strategy, but it is unclear whether any money will remain once the dust clears, says Jennifer Hughes on Breakingviews. Already, a “sharp downturn” in US tech stocks at the end of last week has wiped more than 10% off the Nasdaq Composite index (see page 4).
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
At the same time, SoftBank’s own shares tumbled by 5% once its activities in the options market were revealed, cutting its market cap by $7bn. In any case, even if the deals make money, this is “beside the point”: SoftBank investors can bet on publicly-traded US tech stocks “without Son’s assistance”.
A poor record
It’s hard to disagree with investors who feel that not only is Son’s gambling luck unlikely to hold, but his company also shouldn’t be behaving like a “drunken hedge fund”, says Nils Pratley in The Guardian. After all, Son’s record on timing market movements over short periods “does not impress” given that he lost $70bn during the dotcom crash in the 2000s.
The entire episode suggests that Son now prefers the “fun” of “leveraged bets and short-term risk-taking” to the more complicated task of finding long-term opportunities. These latest revelations not only raise questions about Son’s judgement, which had been called into question before, but also underlines concerns about how “poorly governed” and “financially opaque” the Japanese tech group is, says Lex in the Financial Times. Even before the latest debacle, SoftBank’s reports were just a “mish-mash” of valuation swings – many of which have proven to be wide of the mark – and extracts from the reports of companies Softbank invested in. Investors need to realise that, despite SoftBank’s public listing and retail investor base, it is little more than a “big hedge fund”.
All these problems have resulted in SoftBank having a “deep discount” to its stated net assets, says Jacky Wong in The Wall Street Journal. Ironically, this discount had started to narrow from its March peak thanks to the prudent decision to sell or monetise $42bn-worth of assets to buy back shares and redeem debt. All the progress looks set to be reversed as the “lack of transparency” on this new investment gambit widens this discount further.
-
HMRC confirms crypto ETN ISA rulesWith crypto ETNs now technically available for UK retail investors, HMRC has confirmed they can be held in an ISA – but there’s a complication
-
Pensioners targeted in fine wine scams – the tactics to watch forWine has emerged as the latest lure in investment fraud, with pensioners being specifically targeted by scammers
-
Pierre-Édouard Stérin wants to make France great againConservative billionaire Pierre-Édouard Stérin is seeking to lead a political and spiritual renaissance across the Channel. The planning looks meticulous
-
Global investors have overlooked the top innovators in emerging marketsOpinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Pinewood Technologies: a drive for growthPinewood Technologies’ platform is one of the best in the business. Investors should buy in
-
'EV maker Faraday Future will crash'Faraday Future Intelligent Electric is failing dismally to live up to its name, says Matthew Partridge
-
Investors should cheer the coming nuclear summerThe US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
8 of the best houses for sale with folliesThe best houses for sale with follies in the grounds – from a five-storey Victorian Gothic tower in Tonbridge, Kent, to a former mill in Oxfordshire with gardens that include a folly on an island in a lake
-
A tale of two Reits – why performance matters for valuationAEW UK and Regional are two Reits that are valued very differently, despite a shared focus on properties outside London
-
Healthcare stocks look cheap, but tread carefullyShares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?
