Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<ul>
<li>The market cap of Vision Fund portfolio company <a href="https://www.smartkarma.com/entities/the-we-company" target="_blank" data-smartkarma-citation="entities:28061:1" rel="noopener">The We Company (WeWork) (WE US)</a> has fallen decisively below that of rival <a href="https://www.smartkarma.com/entities/iwg-plc" target="_blank" data-smartkarma-citation="entities:28219:1" rel="noopener">IWG PLC (IWG LN)</a> for the first time</li>
<li>Still despite WeWork's constant drag on portfolio returns including c. $500mn this quarter, Vision Fund remains on track to end the quarter in the black (+$2bn QTD)</li>
<li>The holding company discount appears to have stabilized at 35% but this seems a bit steep with markets volatile again and a move to 40% would not surprise</li>
</ul>


The market cap of Vision Fund portfolio company The We Company (WeWork) (WE US) has fallen decisively below that of rival IWG PLC (IWG LN) for the first time
Still despite WeWork's constant drag on portfolio returns including c. $500mn this quarter, Vision Fund remains on track to end the quarter in the black (+$2bn QTD)
The holding company discount appears to have stabilized at 35% but this seems a bit steep with markets volatile again and a move to 40% would not surprise


Softbank Group - Requiem for WeWork’s Premium Valuation

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Event-Driven

<ul>
<li>Softbank Group’s share price has been supported by the share buyback programme since late September, but 2Q FY2022 results are likely act as a negative catalyst for Softbank shares</li>
<li>Alibaba and its core listed holdings in the Vision Funds have seen market values go lower in recent months; see the diverging market price chart trends in this report</li>
<li>In addition, valuations among the unlisted holdings are also under pressure into October, so 2Q results may not capture the full extent of the down rounds</li>
</ul>


Softbank Group’s share price has been supported by the share buyback programme since late September, but 2Q FY2022 results are likely act as a negative catalyst for Softbank shares
Alibaba and its core listed holdings in the Vision Funds have seen market values go lower in recent months; see the diverging market price chart trends in this report
In addition, valuations among the unlisted holdings are also under pressure into October, so 2Q results may not capture the full extent of the down rounds


Softbank Group (9984 JP) – Defying Gravity into 4Q 2022

<ul>
<li>Vision Fund head Rajeev Misra will step down from Vision Fund 2 to take a new gig managing money for Midde Eastern partners. His VF1 role is unchanged for now</li>
<li>Structurally, this does not change very much as Son-san has always been the decision maker on investments and we never considered Misra as a candidate for succession</li>
<li>After surviving $47bn in public equity losses over the last year, it surprisingly looks like Misra's departure is voluntary</li>
</ul>


Vision Fund head Rajeev Misra will step down from Vision Fund 2 to take a new gig managing money for Midde Eastern partners. His VF1 role is unchanged for now
Structurally, this does not change very much as Son-san has always been the decision maker on investments and we never considered Misra as a candidate for succession
After surviving $47bn in public equity losses over the last year, it surprisingly looks like Misra's departure is voluntary


<ul>
<li>Didi shares jumped 24% on reports regulatory relief was at hand. That is good news for Softbank although the halo effect boosting Alibaba had more of a valuation impact</li>
<li>Less noticed but also relevant as a potential outcome is the de-listing of Zhangmen Education which fell 50% Monday and is down 97% for VF in total</li>
<li>Softbank shares trade at a 43% discount to fair value and remain range-bound.  Tech market sentiment remains the primary driver and we continue to be cautious</li>
</ul>


Didi shares jumped 24% on reports regulatory relief was at hand. That is good news for Softbank although the halo effect boosting Alibaba had more of a valuation impact
Less noticed but also relevant as a potential outcome is the de-listing of Zhangmen Education which fell 50% Monday and is down 97% for VF in total
Softbank shares trade at a 43% discount to fair value and remain range-bound.  Tech market sentiment remains the primary driver and we continue to be cautious


Softbank Group - Didi Relief and ZME Pain Highlight Multiple Potential Outcomes

<ul>
<li>Valuation losses in the public portfolio have increased by $6bn over two days on weakness at Coupang, Grab, DoorDash and WeWork.  Total losses for the quarter stand at $17bn.</li>
<li>With Alibaba shares still weak, NAV/share has moved decisively below ¥10,000/share and is back to where it in May/June 2020 when tech was first rebounding from the Covid shock.</li>
<li>The discount to NAV stands at 49% but is likely to expand when markets in Japan have a chance to respond to how stocks traded in the US on Friday.</li>
</ul>


Valuation losses in the public portfolio have increased by $6bn over two days on weakness at Coupang, Grab, DoorDash and WeWork.  Total losses for the quarter stand at $17bn.
With Alibaba shares still weak, NAV/share has moved decisively below ¥10,000/share and is back to where it in May/June 2020 when tech was first rebounding from the Covid shock.
The discount to NAV stands at 49% but is likely to expand when markets in Japan have a chance to respond to how stocks traded in the US on Friday.


Softbank Group - Tough Week for VF as Public Portfolio Falls $6bn over Two Days

United States

WeWork Inc. provides co-working spaces for individuals and entrepreneurs. The Company offers private offices, office suites, headquarters, and custom build out options to fit a variety of office needs, as well as desk spaces and conference rooms. WeWork serves customers worldwide.

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WeWork (WEWKQ US)

Softbank Group - Requiem for WeWork’s Premium Valuation

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Kirk Boodry

Softbank Group (9984 JP) – Defying Gravity into 4Q 2022

Softbank's share price has defied gravity of late, diverging from the trends of its listed holdings but we see clear hurdles going forward from the...

Victor Galliano

Softbank Group - Business as Usual

Vision Fund head Rajeev Misra is departing to run Middle Eastern money. Operationally, not much changes as Son-san has always been the Softbank...

Kirk Boodry

Softbank Group - Didi Relief and ZME Pain Highlight Multiple Potential Outcomes

Good news on Didi and recent gains for Coupang and Goto highlight the potential for Vision Fund companies to re-rate although the delisting of...

Kirk Boodry

Softbank Group - Tough Week for VF as Public Portfolio Falls $6bn over Two Days

Vision Fund's public portfolio has been hammered on weakness at Grab, Coupang and WeWork and QTD losses are approaching the record level from Q2...

Kirk Boodry

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