Alibaba IPO highlights SoftBank's value dilemma
22/09/2014 05:28
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.) (Refiles to insert dropped word in third
paragraph, second sentence.)
By Una Galani
HONG KONG, Sept 22 (Reuters Breakingviews) - Alibaba's
BABA.N runaway initial public offering has turned the
spotlight back onto SoftBank's 9984.T valuation dilemma.
Following the Chinese e-commerce group's successful New York
listing, the Japanese conglomerate's 32 percent stake eclipses
the value of its other businesses. The 5 percent drop in
SoftBank's shares on the morning of Sept. 22 is a reminder the
investment is both blessing and burden.
SoftBank's $20 million investment in Alibaba back in 2000
probably ranks as one of the greatest ever. Based on Alibaba's
first-day closing share price of $93.89, the stake is valued at
almost $75 billion. SoftBank could not sell at that price even
if it wanted to. But even after applying a 20 percent discount,
the shareholding is now probably worth about $60 billion.
The company run by Masayoshi Son has stakes in other large
listed entities too. The most significant are U.S. mobile
carrier Sprint S.N , internet portal Yahoo Japan 4689.T and
online games maker GungHo Online Entertainment 3765.T . The
market value of these shareholdings - all of which SoftBank
controls - adds up to around $35 billion. Combined with Alibaba,
SoftBank's four main publicly traded investments exceed the
Japanese group's $92 billion market capitalisation.
That suggests investors ascribe little or no value to
SoftBank's profitable Japanese telecom business, says Jefferies.
The brokerage also points out that Alibaba is just one of the
1,300-plus investments that SoftBank has in an array of internet
companies at various stages of growth. Some of these may also
turn out to be gems.
The worry is that investors will be reluctant to give
SoftBank credit for these investments as long as it maintains
such a sprawling portfolio. There are few obvious synergies
between Alibaba and the group's other operations. SoftBank
previously offered investors indirect exposure to the Chinese
e-commerce group. Now they can now buy the shares directly.
Son has made it clear that he intends to maintain SoftBank's
stake in the Chinese group. Unlike Yahoo YHOO.O , the Japanese
group did not sell any shares in the IPO. But unless SoftBank
can find a way to simplify its structure, however, its true
value may remain clouded.
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CONTEXT NEWS
- Shares in Japan's SoftBank fell as much as 4.8 percent by
mid-morning in Tokyo on Sept. 22 following the initial public
offering of Chinese e-commerce giant Alibaba.
- Alibaba listed in New York on Sept. 19 in the largest
initial public offering in history. The shares were priced at
$68 each and closed up 38 percent at more than $93 on the first
day of trading, valuing the company at $234 billion.
- SoftBank owns 32 percent of Alibaba following the listing
and the decision by underwriters to sell additional shares. Its
shareholding is subject to a one-year lock-up period.
- The group said on Sept. 21 that it expected to book a gain
of about 500 billion yen ($4.6 billion) in the half year to
end-September from its shareholding in Alibaba and would
announce a precise figure at a later time.
- Chief executive Masayoshi Son told CNBC that he would want
to own more of Alibaba but was also happy with its current
stake.
- Reuters: Japan's SoftBank shares down over 2 pct after
Alibaba listing ID:nT9N0R901D
- Softbank announcement (PDF): http://bit.ly/1uWLdVL
- E-book: Alibaba and the twelve digits -
- Online version (English): http://bit.ly/BreakingviewsAlibaba
- Download PDF (English): http://bit.ly/BreakingviewsAlibabaPDF
- Download PDF (Chinese): http://bit.ly/BreakingviewsAlibabaPDFChinese
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- For previous columns by the author, Reuters customers can
click on GALANI/
(Editing by Peter Thal Larsen and Katrina Hamlin)
((una.galani@thomsonreuters.com Reuters messaging:
una.galani.thomsonreuters.com@reuters.net))
Keywords: BREAKINGVIEWS SOFTBANK ALIBABA/