Softbank is In Our Range
Long-term investment buy-the-dip classic play.
Softbank's stock has taken a hit with Didi and Alibaba recently. It is however the biggest AI Vision Fund in the world. Although it has a tendency of investing in gambles (think WeWork) and scam founders, it still tries to invest in AI based companies that have the opportunity to scale (think ByteDance).
In the west it's an OTC stock ticker: $SFTBY. The price is $23. It's down from a $49 peak in February, 2021.
They also have been aggressively doing buy-backs. Companies like Coupang should do well in the long-run. Alibaba I believe will also rebound pretty extensively after the Evergrande default crisis plays out.
So what would be a legit price target buying point? The pandemic bottom of March, 2020 was $13, so there's still a ways to go. I would say around $18.50. But you could pick it up as Alibaba reaches its low. It's a long-term investment.
Even ByteDance going public would boost the stock. The list of companies Softbank has invested in is truly impressive. Thus it's a very unique stock and Japanese company. It's able to attract some of the biggest investors into its Vision Fund.
The stock is down 22% in the last month, coinciding with Alibaba's slide. Softbank is aggressive in China and ByteDance stands to be its biggest catalyst for the future. So investing in Softbank, is a bet on ByteDance, which is easily the most valuable startup in the world that has yet to go public.
The regulatory block of the acquisition of Arm is also another arrow in its side. So the news is favorable for this stock to dip and become a buying opportunity. The Japanese technology conglomerate’s business model is a gambler's one, but over the whole it has won. Otherwise it would not be the success it is today.
Recently the Japanese tech giant’s share price fell from 5201 yen ($46) to 5103 yen on the Tokyo stock market. It was $31 dollars on November 16th, 2021 less than a month ago. So the $23 price is even a bit attractive. Portfolio companies including Alibaba, Arm and Didi Chuxing are all experiencing periods of uncertainty that has hit their market value.
Masayoshi Son is a weird personality but also an investor in global markets in a way that's unlike most fund managers. While CEO Masayoshi Son has likened SoftBank to a goose laying “golden eggs,” the most recent results underscore the headwinds for the investment business.
I think it's becoming a real buying opportunity as Didi's re-listing in Hong Kong and Alibaba's growth struggles are not major reversals but just bumps along the road. SoftBank owns about 3 per cent of ByteDance, which will likely become one of the most powerful Chinese companies ever.
Even as the value of its assets fell, SoftBank said its stock is undervalued and pledged to spend up to 1 trillion yen buying back nearly 15% of its shares. As of Monday morning, SoftBank was trading at more than a 50 per cent discount to its October 1 NAV. How close are we do the nadir of SoftBank's price relative to the liquidity pumped market? Earnings and the balance sheet is not that bad.
What's a bit more problematic is Son was playing the stock market with Softbank. Masayoshi Son said he personally took a $1.3 billion hit on his firm’s controversial stock and options investment program. In November he said he will buy back as much as 1 trillion yen ($8.8 billion) of its stock after a decline in the value of its portfolio companies led to a record loss in its Vision Fund investment unit.
Son will diversify Softbank's investments geographically which should protect against such dips happening again in the same way as it has at the end of 2021. With a personal investment in the firm’s Latin American funds being announced today in addition to his investment in Vision Fund 2 -- though he added he had not yet convinced other managers to invest their cash.
SoftBank has struggled to prop up its stock without buybacks, especially as a crackdown in China weighed on the valuations of several key portfolio companies. Geopolitical tensions and delisting worries for Alibaba is adding fuel to the fire of Softbank's market dip.
If you invest in this stock you need to be thinking long-term with a firm understanding of the investments this company has made in futuristic high-growth companies.
Combining all the factors Softbank $STFBY (OTC) may be one of the only OTC stocks working picking up in this environment. This should continue to decline with ARM, Alibaba, Didi and the Evergrande crisis worsening. That’s when you buy a starter position.
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