SoftBank third-quarter earnings recovery seen driven by IPO boom

SoftBank Group Corp is expected to extend earnings recovery when it reports third quarter results on Monday as frothy markets drive a rally in the value of its tech investment portfolio and offer fertile ground for listings.

The Japanese conglomerate is seen posting a net profit of 171 billion yen ($1.63 billion) in the October-December quarter, according to an average estimate of four analysts polled by Refinitiv SmartEstimate.

That compares with net profit attributable to shareholders of 55 billion yen in the same period a year earlier, when operating profit was almost wiped out as the $100 billion Vision Fund plunged to a loss on investments like office sharing firm WeWork.

Monday will see “a lot of talk about how Vision Fund is back,” said Kirk Boodry, analyst at Redex Research.

SoftBank CEO Masayoshi Son dropped the operating profit measure in the first quarter as the benchmark for success, pointing instead to the value of the group’s assets, which the company put at 14,528 yen per share on October 1.

The conglomerate’s shares hit a two decade high of 8,946 yen last month amid a rally in tech shares like Uber Technologies and a surge in equity raising.

Vision Fund-backed food delivery app operator Doordash and home selling platform Opendoor went public in December, with the latter listing via a blank cheque vehicle backed by investor Chamath Palihapitiya.

SoftBank also aims to ride the mania for special purpose investment companies (SPACs), which are seeing record activity, to raise funds using its own SPAC vehicles.

SVF Investment Corp, backed by Vision Fund’s managers, raised $604 million and is trading a third above its IPO price, with a second SPAC headed by group Chief Operating Officer Marcelo Claure aiming to raise $200 million.

Even WeWork is in talks to go public via a SPAC deal, a source has said. SoftBank owns most of the startup’s shares following a bailout but its earnings are not consolidated and there is little disclosure of financials.

Investors will also be eyeing the performance of new trading unit SB Northstar, which has been placing SoftBank’s growing cash reserves in public stocks but reported derivative losses last quarter.

SoftBank’s “very aggressive growth strategy and financial policy” means it “may change very quickly so we need to monitor the company very closely,” said S&P Global Ratings analyst Hiroyuki Nishikawa.

Company executives are trying to diversify the group’s holdings beyond Son’s most successful investment, Alibaba Group, which dominates the portfolio.

Alibaba’s shares have fallen 17% from October highs after Chinese regulators halted the bumper IPO of its fintech affiliate Ant.