Storm clouds hang over SoftBank Group Corp as it prepares to report third-quarter earnings on Tuesday, with the valuations of top portfolio companies slipping and heavyweights departing the Japanese technology conglomerate.
Major SoftBank assets that went public over the last year and are now trading below their listing price include ridehailing company Didi Global, e-commerce firm Coupang and used-car platform Auto1 Group.
In the quarter that ended Dec. 31, artificial intelligence firm SenseTime was a bright spot but others, such as Paytm parent One 97 Communications, have disappointed.
"The valuations they've made just haven't held up," said Redex Research analyst Kirk Boodry. "There's a lot more scepticism."
The new year has offered little respite to Chief Executive Masayoshi Son: January was a bruising month, as investors turned away from growth stocks promising future profits.
"This looks to be a far more critical time for SoftBank than in 2020, when some of its big bets like WeWork and Oyo had gone sour," Asymmetric Advisors analyst Amir Anvarzadeh, who recommends shorting the firm, wrote in a note.
SoftBank is struggling to get investors to reevaluate its shares, which are down by about half since last year's March highs. The group launched a 1 trillion yen ($8.7 billion) buyback in November.
"We aren't convinced that anything other than drastic markdowns would allow markets to declare that the downside risk is all priced in," LightStream Research analyst Mio Kato wrote in a note on the Smartkarma platform.
As the firm winds down its SB Northstar trading arm, it is funneling funds to its second Vision Fund, which has invested smaller sums than its first iteration in more than 150 startups.
One major reason for the group's buyback last year was ongoing executive frustration at the size of the conglomerate discount, or the gap between the value of its assets and its share price.
The sale of chip designer Arm to Nvidia, which could have unlocked funds for further share repurchases, is widely expected to fall through because of regulatory hurdles. An initial public listing is seen as an alternative but analysts question the prospects for such a move.
"We are sceptical that an outright IPO of Arm will result in value creation for SBG shareholders," Jefferies analyst Atul Goyal wrote in a note.
Other assets include stakes in e-commerce firm Alibaba, whose shares have slid drastically as China tech is hammered by regulatory action, and telco SoftBank Corp, which is trading below its listing price.
Top executives, including Chief Operating Officer Marcelo Claure, have moved to exit the company. The shift cements Vision Fund chief Rajeev Misra's pivotal role as SoftBank prioritises investing through that unit.