Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<ul>
<li>PayTM shares fell 27% in their debut as investors seem unhappy with loss-making companies.  Policy Bazaar's Monday listing was better (+40%) but it's not a good sign for Oyo</li>
<li>This is the seventh Q3 listing event for Vision Fund after little activity in Q2 and is consistent with weak performance for 2021 IPOs in general</li>
<li>The buyback is doing its job with shares up 13% in two weeks with the discount moving from 48%to 43%.  We have updated our Softbank and VF tables below</li>
</ul>


PayTM shares fell 27% in their debut as investors seem unhappy with loss-making companies.  Policy Bazaar's Monday listing was better (+40%) but it's not a good sign for Oyo
This is the seventh Q3 listing event for Vision Fund after little activity in Q2 and is consistent with weak performance for 2021 IPOs in general
The buyback is doing its job with shares up 13% in two weeks with the discount moving from 48%to 43%.  We have updated our Softbank and VF tables below


Softbank Group Mixed Early Results for Indian IPOs

These are our initial thoughts – we will write more about the quarter later – but we wanted to get our initial thoughts on the buyback out.This was a terrible print for <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a>  which posted record investment losses for Vision Fund despite some fancy footwork on valuations in the private portfolio. That seems to make the announcement of a ¥1,000bn share buyback less surprising. No doubt it will attract interest as the shares trade near 52-week lows and at the high-end of the holding company discount range but there are some caveats that may temper enthusiasm whilst the longer-term risk is that the buyback is tied to completion of the Nvidia/ARM deal, which still faces regulatory scrutiny.

These are our initial thoughts – we will write more about the quarter later – but we wanted to get our initial thoughts on the buyback out.This was a terrible print for Softbank Group (9984 JP)  which posted record investment losses for Vision Fund despite some fancy footwork on valuations in the private portfolio. That seems to make the announcement of a ¥1,000bn share buyback less surprising. No doubt it will attract interest as the shares trade near 52-week lows and at the high-end of the holding company discount range but there are some caveats that may temper enthusiasm whilst the longer-term risk is that the buyback is tied to completion of the Nvidia/ARM deal, which still faces regulatory scrutiny.   

Softbank Group Q2 21 Results Reaction: Softbank May Intend to Use ARM Proceeds for Buyback

Equity Capital Markets

The Oyo listing should be a win for Softbank Group, which owns 47% (pre-listing) for a mere $1.1bn but initial pricing talk of $10-12bn seems wildly optimistic when matched against comparable valuations for premium online travel companies like Airbnb (implied Oyo value $4bn) or India tech ($7bn). Last year we thought this was worthless, so the turnaround is a pleasant surprise but we would not be buyers over INR 80/share ($7bn).

The Oyo listing should be a win for Softbank Group, which owns 47% (pre-listing) for a mere $1.1bn but initial pricing talk of $10-12bn seems wildly optimistic when matched against comparable valuations for premium online travel companies like Airbnb (implied Oyo value $4bn) or India tech ($7bn). Last year we thought this was worthless, so the turnaround is a pleasant surprise but we would not be buyers over INR 80/share ($7bn).

Oyo and Softbank Group - This Would Be Generously Valued at $4-7bn but that Keeps CEO Under Water

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Indian hospitality start-up, <a href="https://www.smartkarma.com/entities/oyo-pvt-ltd" target="_blank" data-smartkarma-citation="entities:28861:1" rel="noopener">Oyo (1698548D IN)</a> is a digital platform connecting over 157,000 storefronts (hotels and homestays) with consumers. The company is trying to ride the Indian IPO wave with a $1.1bn IPO in India.Oyo is 46.6% owned by the Softbank Vision Fund and it is another example of a typical Softbank Investment like <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> and <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a>. Oyo’s old business model was a complete disaster, and it almost ran the company into the ground. The new business model makes Oyo look more like a marketplace for lodging. Despite changes to the business model, we continue to have concerns as Oyo could be neither growth nor profits business under its new business model.

Indian hospitality start-up, Oyo (1698548D IN) is a digital platform connecting over 157,000 storefronts (hotels and homestays) with consumers. The company is trying to ride the Indian IPO wave with a $1.1bn IPO in India.Oyo is 46.6% owned by the Softbank Vision Fund and it is another example of a typical Softbank Investment like The We Company (WeWork) (WE US) and Uber (UBER US). Oyo’s old business model was a complete disaster, and it almost ran the company into the ground. The new business model makes Oyo look more like a marketplace for lodging. Despite changes to the business model, we continue to have concerns as Oyo could be neither growth nor profits business under its new business model.

The next financial report for Softbank will be a tough one. With the quarterly results in, Vision Fund’s public portfolio losses appear to be in the range of $18.3bn with another $1.4bn in losses for parent level investments. China exposure is a major driver whilst Coupang continues to spiral down from the heady highs in March. The holding company discount has held up (-41% v -44% at Q1-end) but the underlying value per share has spiraled down as VF and Alibaba weaken. We think a higher discount makes more sense but optimism on upcoming IPOs for PayTM and AutoStore could lend support in the near-term.

The next financial report for Softbank will be a tough one. With the quarterly results in, Vision Fund’s public portfolio losses appear to be in the range of $18.3bn with another $1.4bn in losses for parent level investments. China exposure is a major driver whilst Coupang continues to spiral down from the heady highs in March. The holding company discount has held up (-41% v -44% at Q1-end) but the underlying value per share has spiraled down as VF and Alibaba weaken. We think a higher discount makes more sense but optimism on upcoming IPOs for PayTM and AutoStore could lend support in the near-term. 

Softbank Group - A First Look at Investment Losses for the Quarter

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 Mixed Early Results for Indian IPOs

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Kirk Boodry

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Oyo is a typical Softbank Investment. Its old business model was a complete disaster, and it almost ran the company into the ground. The new...

Oshadhi Kumarasiri

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The next financial report for Softbank will be a tough one. With quarterly results in, Vision Fund’s public portfolio losses are c. $18.3bn. We...

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