Masayoshi Son’s rough week is capped by Elliott selling SoftBank stake

Just eight days after SoftBank Group Corp. reported a record loss for the last quarter, its shares fell after a report that hedge fund Elliott Management Corp. has sold off almost all of its position in the Japanese conglomerate. SoftBank’s stock is off almost 50% from its peak last year.

Elliott made the move earlier this year, when tech stocks including SoftBank’s were in the grip of an extended selloff, the Financial Times reported, citing people familiar with the trade. The exact size and timing of the sale were unknown, though the US-based activist investor also sold a substantial amount of shares at a profit last year, it added. Elliott had accumulated a stake of close to $3 billion in SoftBank by February 2020.

Elliott’s dumping of SoftBank shares comes as investors increasingly lose confidence in Son and his ability to close the valuation gap between the company and its portfolio holdings. SoftBank’s plan to cash in on its purchase of chip architect Arm Ltd. remains stalled amid a sluggish chip market.

“Rising uncertainty on platform company investments and Vision Fund management, and the lack of cash flow from other asset sales means the discount might be tough to narrow further,” said Travis Lundy, an analyst who publishes on SmartKarma.

A SoftBank spokesman declined to comment. An Elliott representative didn’t immediately respond to emails seeking comment.

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One week ago, SoftBank reported a record $23 billion quarterly loss, which Son compared to a humiliating rout by a feudal lord. After marking down valuations throughout the Vision Fund’s portfolio spanning hundreds of companies, Son apologized for his hubris and over-confidence. With concerns raised over the conglomerate’s own financial stability, Son pledged to slash operating costs, lower headcount, and restrain himself from what he thought might be bargains in the startup world.

Fortress Investment Group, which SoftBank had acquired with much fanfare at more than $3 billion in 2017, was on the block, Son said. Just two days later, SoftBank announced it was letting go of a third of its prized stake in Chinese e-commerce giant Alibaba Group Holding Ltd. to shore up its finances. Son’s early investment in Alibaba in 2000 is one of venture capital’s legendary investments, and cemented Son’s claim as a visionary stock picker.

His losses go beyond the company too. The tech market swoon means the Japanese billionaire is personally down more than $4 billion on a series of side deals he set up to help boost his own compensation, Bloomberg News reported last week.

Shares in SoftBank fell 2.6% after the Elliott news, compared with the little-changed Topix index. Its shares are up 5.8% from the start of the year, supported by SoftBank’s promise to buy back up to 250 million shares for as much as 1 trillion yen. It has further said it would buy and cancel up to 400 billion yen worth of its own shares in the coming year.