July22,2019 BARRON’S 19
Asset / Ticker Stake Value (bil)
Alibaba/ BABA 25.8% $116.
Softbank Corp/ 9434.Japan 66.5 42.
Sprint/S 84.4 23.
Yahoo Japan/ 4689.Japan 48.2 9.6*
Arm(Privately Held)
75% SoftBank Group 24.
25% Vision Fund
Vision Fund 26.2**
Other Assets 4.6**
Net Debt 40.6**
Total Value Less Net Debt 196.
Current Market Cap 100.
Discount 49%
What’s SoftBank Group Worth?
On a sum-of-the-parts basis, the shares of the
company are arguably priced 30% to 50% below
the value of its underlying assets.
* Held in SoftBank Corp. and not included in the total value **As of March 31.
Sources: Company reports; Barron’s research
SoftBank Group owns a dizzying
array of assets, from Japan’s reign-
ing baseball champions to a $
billion stake in Alibaba Group Hold-
ing.
The company’s iconic leader likes
to compare SoftBank’s portfolio to
the stars in the Milky Way, saying
they “will continue shining for 300
years.” He tells investors with all
seriousness that he draws inspiration
“from the way the bacterium has
evolved since four billion years ago,
when it is said to have originated as
the source of organisms.”
It is any wonder that SoftBank
(ticker: SFTBY) is so little under-
stood?
And yet, investing in SoftBank
Group offers a radically discounted
bet on the future. The stock is
cheap. Crazy cheap. On a sum-of-
the-parts basis, its shares are argu-
ably priced 30% to 50% below the
value of their underlying assets.
Understanding what you get when
you buy a share of SoftBank takes
effort—but stick with it, the payoff
could be big.
At the heart of the story is Soft-
Bank’s founder and CEO,
Masayoshi Son, the second-richest
man in Japan (after Tadashi Yanai,
founder of Fast Retailing, which
owns the Uniqlo clothing-store
chain). Masa, as he is known, accu-
mulated his wealth as a technology
investor and entrepreneur. He’s
been ceaselessly wheeling-and-deal-
ing for almost four decades.
In a rare interview, Masa tells
Barron’s that SoftBank is a “strate-
gic investment company for the
growth of technology, especially
around AI.”
Besides Alibaba Group Holding
(BABA), SoftBank has big stakes in
Yahoo Japan (4689. Japan) and
Sprint (S). It also owns 66.5% of
the third-largest wireless company
in Japan: SoftBank Corp. (9434.
Japan), which last year had the sec-
ond-biggest initial public offering of
all time.
The third and most important part
of the equation is that SoftBank
Group shares come with the Vision
Fund, a $103 billion venture fund
whose investments include Uber
Technologies (UBER), WeWork,
Slack Technologies (WORK), and
DoorDash, among many others. At
SoftBank’s current stock price, that
bet is effectively free.
Masa, who turns 62 next month,
compares his approach to that of a
zaibatsu , or a Japanese conglomer-
ate, but then explains that, in fact,
it is totally different.
And that 300-year investing time
line? “There were many long dynas-
ties in Asia,” he tells Barron’s.
“We’re creating an ecosystem that
can last for a long time. That’s what
I’m interested in. The industrial
revolution started a few hundred
years ago, and still is an important
part of modern life. The information
revolution will last for the next few
hundred years. We’re looking at the
long horizon to design the architec-
ture of our ecosystem to last, not
just for my life.”
The challenge for investors is
that you can’t find a reasonable
comparison. SoftBank is not really a
conglomerate; and it isn’t structured
as a closed-end fund or fund-man-
agement business. The Japanese
stock (9984. Japan) isn’t widely
owned by U.S. institutions, nor is it
well-covered by U.S.-based equity
analysts. The stock is listed on the
Tokyo Stock Exchange; in the U.S.,
the ADRs trade only on the pink
sheets, though with substantial vol-
ume, lately averaging about 900,
shares a day. They closed on Friday
at $23.43.
“It’s easy to attack Masa’s invest-
ment style, given its aggression and
willingness to pay high valuations in
private companies,” says Walter
Piecyk, a technology analyst with
BTIG, “but overall, it’s a group of
very interesting investments that
investors can participate in at a dis-
count.”
The most obvious potential cata-
lyst for the stock will be the evolu-
tion of the Vision Fund, which in-
cludes several dozen unicorns—
company’s worth at least $1 billion
in the private market—with a flood
of initial public offerings possible in
the years ahead.
Chris Lane, an analyst with
Bernstein Research, is bullish on
SoftBank shares, largely based on
the promise of the Vision Fund.
“Masa is probably better at this
than anyone, in most cases getting
in early enough that the invest-
ments will ultimately prove to be
value-creating,” Lane says. He
thinks that in a few years, as Soft-
Bank adds a second fund, and per-
haps others after that, net exits will
outweigh new investments.
SoftBank has even generated a
27% return on its stake in Uber,
despite the ride-sharing company’s
weak performance following its ini-
tial public offering.
“People think Masa just wants to
buy things and own everything,”
Lane says. “Our view is, he wants
to make money, sell smart, and get
out at the right time.”
Indeed, investing in SoftBank
means investing in Masa.
An ethnic Korean born in 1957 as
Son Jeong-ui, Masayoshi Son grew
up on Japan’s Kyushu Island, where
his father was a pig farmer. Masa
moved to California for high school
at age 16, spent several years at
Holy Names University in Oakland,
and studied economics and com-
puter science at the University of
California at Berkeley. There, he
got an early start on tech deal-mak-
ing. At age 19, working with some
Berkeley professors, he sold an
electronic language translator to
Sharp for about $1.7 million.
In 1981, a year after graduating,
Masa launched SoftBank, with a focus
on distributing packaged software in
Japan. SoftBank’s name is a reference
to those early years—Masa thought of
the various programs he offered as a
software bank.
It’s not a bank—and it’s never
been one. But it sure does have a
lot of cash to play with. And it has
funded a who’s who of technology
names.
Over the decades, SoftBank has
bought, launched, or invested in an
astonishing variety of iconic proper-
ties. In the 1990s, it bought Com-
dex, once the world’s biggest tech
trade show, as well as Ziff-Davis,
publisher of PC Week and other
trade publications. A big bet on Ya-
hoo in 1996 paid off with a huge
return, and led to the company’s
current wager on Yahoo Japan.
But much of its portfolio was tied
to companies that thrived and died
with the dot-com bubble. By 2001,
SoftBank owned stakes in 600 inter-
net businesses—ETrade, GeoCities,
Kozmo.com, Webvan—a portfolio
that helped sink SoftBank’s market
capitalization from $175 billion to
less than $3 billion, based on cur-
rent exchange rates.
Masa and SoftBank survived the
bursting of the dot-com bubble, re-
structuring and rebuilding in the
following years and setting the
stage for the current thriving ver-
sion of the company.
SoftBank consists of three major
elements: big stakes in public com-
panies; businesses it owns outright;
and the Vision Fund.
It all starts with its interest in
the Chinese e-commerce giant Ali-
baba. In 1999, SoftBank invested
$20 million in the company, which
was founded by Masa’s buddy Jack
Ma. Today, SoftBank holds a 26%
position in Alibaba, worth about
$116 billion. Masa’s Alibaba bet
S
