What's going on?
SoftBank – the Japanese conglomerate with large stakes in Uber and WeWork, among others – reported results on Monday that blew past expectations.
What does this mean?
The company’s profit last quarter was nearly double forecasts at over $6 billion, helped by ever-more-valuable investments in fast-growing tech companies. Despite its big-ticket backing of telecoms companies like Sprint, it’s SoftBank’s $100 billion Vision Fund that’s made it a household name as one of the world’s biggest tech investors. That fund contributed around $3.5 billion of the company’s quarterly profit – more than all of Softbank’s other businesses combined (tweet this).
Why should I care?
For markets: Buybacks are back for investment companies.
Warren Buffett’s investment company, Berkshire Hathaway, told the market on Saturday that it repurchased over $900 million of its own stock last quarter. With valuations of potential investee companies sky high, Buffett put Berkshire’s cash to work propping up its own share price instead. Historically, Berkshire had promised to only buy back its shares when they dropped below a set level relative to what the company was worth on paper, but it’s now taking a more flexible approach – buying when management feel the stock price is below what it thinks Berkshire is intrinsically worth.
The bigger picture: Sticking to the Vision.
SoftBank’s Vision Fund has come under scrutiny in the last few months: its biggest investor, contributing almost half its war chest, is Saudi Arabia. After a journalist was killed at a Saudi embassy last month, there’s been growing pressure on companies to reject Saudi cash. SoftBank’s CEO, along with a handful of other high-profile business leaders, pulled out of an investment conference in the Kingdom last month, and Tesla’s Elon Musk said he probably wouldn’t take money from Saudi Arabia. But SoftBank said on Monday that it has a duty to Saudi citizens to invest on their behalf, potentially encouraging other companies not to sever ties just yet.