Arigatō But No Arigatō

Image source: gonin - Shutterstock Softbank

What's going on?

SoftBank reported the highest-ever annual profit for any Japanese company on Wednesday, even though investors have been giving its stock a wide berth (tweet this).

What does this mean?

SoftBank’s Vision Fund – the world’s biggest tech-focused venture capital fund – seriously benefited from last quarter’s tech stock rally, and not just because it boosted the shares of its already-listed investments like Uber. The rally also encouraged some of the company’s startup investments – including Coupang, the “Amazon of South Korea“ – to make their stock market debuts. Both factors worked together to push the Vision Fund’s profit up for the third quarter in a row, making the fund the biggest driver of SoftBank’s record-breaking full-year earnings. That’s quite the about-turn: the Vision Fund was the reason for the company’s biggest loss in its history early last year.

 

Why should I care?

For markets: All is not well.


SoftBank’s stock price has been on a tear in the past year, and investors reckon its share buyback program – which reduces the supply of shares in the market, in turn boosting the prices of those that are left – has had a lot to do with it. But things have taken a wrong turn in the last couple of months: the company’s share price has dropped 14% since its two-decade high in March – both because it’s so far failed to promise more buybacks, and because it’s been caught up in the recent tech stock selloff.



Zooming out: Carmakers are (still) in trouble.


SoftBank’s annual profit is roughly double the country’s previous high, but Toyota needn’t feel too put out about losing its record: the carmaker announced on Wednesday that its quarterly profit almost doubled from a year ago, and it said it’s expecting its sales and profit to return to pre-pandemic levels this year. Still, that confidence is the exception among automakers, not the rule: its rivals are still battling a chip shortage that’s losing them billions of dollars in revenue.

 

Originally posted as part of the Finimize daily email.

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