Analysts estimate a 20% drop in SoftBank’s quarterly operating profit in its upcoming earnings report

Japan’s SoftBank Group is likely to announce its quarterly performance results in the upcoming days with analysts expecting its earnings report to highlight a significant drop in profits. Prospects of downbeat results, experts added, is fueling concerns regarding Softbank’s ability to raise sufficient funds for the second Vision Fund as well as to sustain the Elliot Management activist fund.

As
per the sources, the New York-based Elliot
fund has a massive $3 billion stake in SoftBank and is now demanding changes
that include stock buybacks worth $20 billion. Billionaire Paul Singer had founded
the fund in 1977.

SoftBank
Posted Its First Quarterly Loss In Over A Decade In Its Last Earnings Report

Elliot’s
investment in SoftBank came amidst its losing bet on WeWork (office-sharing
startup) that has remained troublesome for the bank in the past months. In the
previous quarter, SoftBank had posted a quarterly loss that marked its first in
almost a 1.5 decade. Among other challenges for SoftBank is the allegation of a
lack of transparency revolving its Vision Fund of multiple startups that remain
unlisted to date. The Vision Fund is currently valued at $100 billion.

The
tech conglomerate is expected to reveal its earnings report on Wednesday. As
per the analysts, the results are likely to highlight a 20% decline in SoftBank’s
quarterly operating profit. According to Refinitiv, the average analysts’
forecast is currently at 345 billion yen for Softbank’s quarterly operating
profit.

Previously,
SoftBank had seen a 704 billion yen of operating loss when its failed bets on
companies like Uber and WeWork had contributed to a shocking $8.9 billion hit
at the bank’s Vision Fund. Following the loss, Softbank’s founder Masayoshi Son
had accepted that his judgment regarding the past few investments was poor, to
say the least.

Downbeat
Results In Q2 Will Raise Questions On The Viability Of 2^nd Vision
Fund

If
the bank fails to accentuate optimism in its Q2 performance results, it will
raise serious questions on the viability
of the bank’s second Vision Fund that is expected to depend on the profits
that the bank makes from its first Vision Fund for sufficient financing.

Amidst
the rising complications, however, SoftBank is performing fairly well in the
stock market in 2020 with the company having gained around 12% so far. SoftBank
remained upbeat in 2019 as well with share prices closing the last year with an
over 30% surge. However, the stock had climbed as high as 5,778 JPY in April
2019 but lost much of the gains to close the year around 4,756 JPY.