SoftBank Is Trading At A Huge Discount Of 50%

Oct. 29, 2019 11:30 AM ETSoftBank Group Corp. (SFTBF), SFTBYWE39 Comments
Sven Carlin profile picture
Sven Carlin
14.96K Followers

Summary

  • SoftBank is not The We Company, SoftBank is Alibaba. The market seems to have forgotten it which creates an opportunity.
  • By buying SoftBank you get BABA and everything else is practically for free.
  • If Masayoshi Son delivers of his promise, you can expect 20,000% returns for the Vision Fund and 2,000% for SoftBank.

As an investor, I am always attracted to investing stories that have many things going on for them, but where the market mostly focuses on just one small part of the story. Usually, the small part of the story makes a lot of noise in the news. Softbank (OTCPK:SFTBY) (OTCPK:SFTBF) is a perfect example of such a situation.

softbank stock price

SFTBY has been under pressure lately due to all the noise related to The We Company (WE). The stock is down 32% over just the last two months. SFTBY's market cap declined from $112.5 billion to the current $76.5 billion. I don't think it is rational that one company like WE, just partially owned through SoftBank's Vision Fund, destroys $32 billion in SFTBY's value.

To put things into perspective, one has to approach SFTBY for what it really is; a venture capitalist vehicle that you can actually invest in as it is listed, that happens to own 25% of Alibaba (BABA). On top of BABA, there are other holdings; SoftBank Corporation (OTCPK:SOBKY) that owns a Japanese telecom and Yahoo Japan, Arm Holdings - the chip maker the company acquired in 2016 for $32 billion, Sprint Corporation (S) and the stake in the Vision Fund exposed to 82 various start-ups.

softbank vision fundSource: SoftBank Investor Relations

I think the whole SoftBank investment thesis boils down to two things. The first is owning BABA, S and ARM as businesses, while the second thing is the exposure the Vision Fund offers from a venture capitalist perspective over the next few decades. The thing is that you practically get the AI venture exposure for free as just the value of the stake in BABA covers SFTBY's current stock price.

Further, if Masayoshi Son will end up being correct in his predictions, SFTBY investors will enjoy returns above 15% per year over the next 20 years. To see whether he will be right, we will have to wait 20 years, but this again shows how the current noise surrounding WE isn't really what SFTBY is about.

softbank stock forecast Source: SoftBank Investor Relations

To conclude, SFTBY is for those looking for exposure to BABA, ARM, telecoms' cash flows, free upside coming from the Vision Fund and are ready to wait 20 years for that to materialize. Analyzing short term fluctuations, the impact a few companies might have on STBY's Vision fund, out of the 82 invested companies, is nonsense and most probably a waste of time as nobody, not even Masayoshi Son, knows how will the AI world SFTBY is exposed to, look in 5 years.

If you wish to hear more about my reasoning, please enjoy the video.

Video content:

1:48 SoftBank's net value per share

4:37 Investment thesis for SoftBank long-term

6:10 Stock price diverges from fundamentals

7:35 SoftBank's other holdings

9:53 Vision Fund

13:01 Investing risks

14:32 Investing thesis and strategy

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

This article was written by

Sven Carlin profile picture
14.96K Followers
Passionate about value investing! Education: PhD - A Real Value Risk Estimation Model for an Emerging Market Experience: Investment manager at Let it grow investments, Netherlands Assistant professor at the University of applied sciences Amsterdam, Netherlands Data researcher at Bloomberg, London UK

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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