SoftBank's Masayoshi Son poised for another IPO windfall in 2021

Even for a man whose career has been filled with epic success and failure, SoftBank CEO Masayoshi Son's 2020 was unusually dramatic. PHOTO: REUTERS

TOKYO (BLOOMBERG) - SoftBank Group Corp is preparing to take at least six more of its portfolio companies public this year, building on a 2020 turnaround that pushed the value of Masayoshi Son's technology conglomerate to the highest since the dot-com boom.

Among the start-ups heading for initial public offerings are South Korean e-commerce pioneer Coupang Corp, Indonesian online mall operator PT Tokopedia and China's ride-hailing giant Didi Chuxing, according to people familiar with the matter, asking not to be named because the matter is private. The IPOs could give Son another round of enormous gains after successful offerings from DoorDash and KE Holdings in 2020.

Mr Son started last year under a cloud after the meltdown at WeWork, then saw his shares plunge with the coronavirus pandemic and a loss of almost US$18 billion at SoftBank's Vision Fund. But the Japanese billionaire, long reluctant to cash out of investments like Alibaba Group Holding, embarked on an uncharacteristic sales blitz, raising more than US$50 billion by shedding stakes in Alibaba, T-Mobile US and its domestic wireless affiliate, SoftBank Corp. He used the cash to buy back his own shares, pushing SoftBank Group's stock to the highest level since 2000.

If demand for IPOs continues to be robust, it would improve the prospects for the remaining 100 or so start-ups in SoftBank's portfolio. That would give Son more liquid assets to keep funding buybacks - or perhaps take his company private.

"That old concern about them not being willing to monetize assets is largely in the past," said Justin Tang, head of Asian research at United First Partners in Singapore. "Son has successfully shed the WeWork stigma and no one talks about that anymore. The story is now about further investment exits and prospects for privatization."

Even for a man whose career has been filled with epic success and failure, Mr Son's 2020 was unusually dramatic. In the span of a few months, SoftBank lost half its value in a pandemic-driven rout, reported the largest loss in its history and then recovered to record profits and a surging valuation.

Mr Son was rescued, at least in part, by the speculative frenzy sweeping global markets. Energized by the fervor, Japan's most famous financier agreed to sell chip designer Arm in the largest deal of his career, tried his hand at trading stock options and flirted with taking his company private. Now, the Vision Fund is on track to report its second quarter of record profits and SoftBank is raising US$525 million through a blank-check company.

The outbreak has had an uneven impact onMr Son's start-ups. With many people sheltering at home, SoftBank took large writedowns on the value of office-sharing giant WeWork and hotel-booking service Oyo Hotels & Homes. At the same time, e-commerce and food-delivery companies have seen their prospects brighten.

Tokopedia may be the closest to a market debut. Indonesia's largest online mall last month hired advisers, saying it is considering options for a public debut. The company is in talks to merge with ride-hailing provider Gojek ahead of an IPO of the combined entity and, separately, has discussed going public by combining with the special purpose acquisition company Bridgetown Holdings.

In either scenario, Tokopedia could be valued at about US$10 billion. SoftBank's Vision Fund owns about a quarter of the company, a stake it acquired for less than US$1 billion, one of the people said.

Coupang's IPO could come in the second quarter of this year and may value the South Korean e-commerce giant at over US$30 billion, according to people familiar with the matter. The Vision Fund paid US$2.7 billion to acquire its 37 per cent stake in the company, most of it at a US$9 billion post-money valuation, the person said.

India's Policybazaar is also considering a listing that may value the online insurance platform at over US$3.5 billion. SoftBank invested about US$200 million in the company at US$1.5 billion pre-money valuation and owns around 15 per cent, the person said. Auto1 Group GmbH is looking to raise 1 billion euros (US$1.2 billion) in an offering that would value the German used car retailer at over US$6 billion. SoftBank paid US$600 million for its 20 per cent stake at a pre-money valuation of US$2.9 billion, the person said.

SoftBank also owns a stake in ByteDance, the enormously successful Chinese parent of the video app TikTok. SoftBank invested US$2.5 billion at a US$75 billion pre-money valuation, according to the person. The company is in talks to raise money at a US$180 billion valuation before listing some of its businesses in Hong Kong, Bloomberg News has reported.

Perhaps most significant would be Didi. Son has been the largest investor in ride-hailing companies, pouring over US$20 billion into Uber Technologies, Didi, Southeast Asia's Grab and India's Ola. Uber went public in 2019, but its rocky debut dampened demand for similar stocks.

Uber shares jumped 71 per cent last year however, suggesting the markets are once again open to such money-losing start-ups. The Chinese ride-hailing giant is already considering a listing in the US in the second half of this year, the people familiar said. SoftBank owns about 20 per cent of the company after investing over US$10 billion, making it the single-biggest investment in the Vision Fund's portfolio.

Other SoftBank companies that have reportedly begun preparations for IPOs include the US real estate brokerage Compass, India's online grocery Grofers and SenseTime Group, China's largest artificial intelligence company.

Several SoftBank-backed companies have already pulled off solid debuts. Online home-insurance provider Lemonade quadrupled since its July IPO, while oncology drug developer Relay Therapeutics has surged about 90 per cent since its trading debut. The August listing of KE Holdings, a Chinese online property platform, added US$5.1 billion in paper gains to Vision Fund's profit in the quarter ended in September. Last month's market debut of DoorDash, a food-delivery company where SoftBank holds a 20 per cent stake, is alone likely to bring in over US$10 billion profit in unrealized gains.

"A less charitable view could hold that Son's past mistakes were most of his own making, but the recent successes are in the large part the market giving Son a salvation," said Atul Goyal, senior analyst at Jefferies.

Fueled by central bank stimulus and individual investors, companies announced a record US$208 billion in IPOs in the US last year. DoorDash's US$3.4 billion debut was the fourth-biggest, while KE Holdings was No. 7 with US$2.4 billion. Special purpose acquisition companies accounted for almost half of the total.

SoftBank needs more successes as Alibaba - by far its most valuable holding - comes under scrutiny from China's antitrust authorities. The e-commerce giant's stock has tumbled more than 20 per cent from its peak in October.

"There is a window of opportunity for listing and selling SoftBank portfolio companies before IPO fatigue sets in," saidMr Tang at United First Partners. "We are closer to the end of it than the beginning."

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