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SoftBank Gives Up Pretending It Isn't a Fund

Tim Culpan

(Bloomberg Opinion) -- SoftBank Group Corp. has given up pretending to operate anything.

Once the owner of two telecom companies and a collection of other operating businesses, the Japanese conglomerate would report quarterly operating profit and net income.

That’s how most normal companies do it. In days past, the former category included profits from Sprint Corp. and Softbank Corp., as well as operating income from the SoftBank Vision Fund, but excluded gains or losses from other investments.

On Tuesday, SoftBank announced it will no longer bother reporting operating income, instead “gain (loss) on investments will be used in order to show investment performance in the consolidated financial results.” The catalyst was the sale of Sprint to T-Mobile US Inc., meaning that the U.S. mobile operator is no longer a consolidated entity. 

The change makes sense. SoftBank hasn’t “operated” anything for a while, instead cobbling together a growing pile of investments both within the Vision Fund (such as ByteDance Ltd. and Uber Technologies Inc.) and outside (including Alibaba Group Holding Ltd. and domestically listed telco Softbank Corp.).

In the June quarter, the major driver of earnings was the sale of shares in T-Mobile. A year earlier, it was a rise in the value of its stake in Alibaba. SoftBank Corp. continues to provide a handy income stream.

With the Vision Fund’s $98.6 billion almost fully invested, there’s not much left to be done hunting for unicorns and handing out fat checks. Earnings from the fund, generally based on mark-to-market valuation changes, fell 39% for the period.

This shift in reporting may be all the more relevant in light of one of the few remaining companies that SoftBank controls, but which is neither listed nor controlled by the Vision Fund: Arm Ltd.

SoftBank seems desperate to offload the British semiconductor company  just four years after acquiring it for $32 billion. My colleague Alex Webb and myself recently advised against an IPO because the unit’s revenue has slowed and SoftBank would get a better price if it waited for a pickup in demand for new devices like internet of things and self-driving cars. The news flow over the past few weeks indicates that Softbank Chief Executive Officer Masayoshi Son and his team have been doing the hard sell, with names like Nvidia Corp., Taiwan Semiconductor Manufacturing Co. and Foxconn Technology Group all in the mix.

Should a sale go through, even a partial divestiture, the pool of companies that Son’s team controls will shrink further. I’d hazard that we could see a further offloading of its shares in SoftBank Corp., too.

These moves would put even more of the burden of earnings on returns from its portfolio of investments, of which Alibaba remains the largest. Today, SoftBank Group’s net asset value can largely be tracked in real time simply by following the stocks it owns. Sadly, the company just took a back step backward for transparency by announcing Tuesday that it would no long post daily updates on its website.

For investors, the reporting shift highlights the truth of what SoftBank Group has become: a fancy, highly managed fund — a hedge fund, perhaps — whose returns ought to be benchmarked against indexes of its peers and not as the technology company Son once ran.


This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

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