SoftBank's plunge hits US$19b amid tech rout, Saudi outcry

SoftBank shares fell as much as 6.4 per cent in Tokyo on Oct 15, pushing the decline in market value to about US$19 billion (S$26.2 billion) since its peak this year.
SoftBank shares fell as much as 6.4 per cent in Tokyo on Oct 15, pushing the decline in market value to about US$19 billion (S$26.2 billion) since its peak this year.PHOTO: REUTERS

TOKYO (BLOOMBERG) - SoftBank Group Corp has been battered over the past two weeks as technology stocks plummet globally and the outcry over a missing Saudi Arabian journalist escalates into a global controversy.

SoftBank shares fell as much as 6.4 per cent in Tokyo on Monday (Oct 15), pushing the decline in market value to about US$19 billion (S$26.2 billion) since its peak this year. The stock had gained 29 per cent this year through Sept 28 as investors began to credit founder Masayoshi Son for his ambitious investments in technology startups, including Uber Technologies, Didi Chuxing and WeWork Cos.

But Mr Son has been dealt successive setbacks in the past two weeks. Tech shares have retreated in the face of the US-China trade war, potentially jeopardizing the value of SoftBank's portfolio companies. Then journalist Jamal Khashoggi disappeared after visiting the Saudi consulate in Turkey, leading Turkish authorities to accuse Saudi Arabia of killing the writer who had criticized his kingdom's government.

Saudi Arabia, which has denied any wrongdoing, is the biggest outside investor in SoftBank's US$100 billion Vision Fund and is coming under increasing international pressure over the incident. Executives, including the head of JPMorgan Chase & Co, have pulled out of a high profile summit in the country and the US is weighing action against the country over the disappearance.

"We are not liking how Softbank has been trading and have decided to remove it from our recommended longs," Amir Anvarzadeh, a senior strategist with Asymmetric Advisors in Singapore, wrote in a research note Monday. "Although we don't expect this latest diplomatic incident to lead to any sanctions on Saudi, there is always some possibility that some firms will pull out their money from the Vision Fund."

He said his bigger concern is the valuation of technology stocks.

"We are starting to worry about other more likely scenarios that could prove as disruptive to Son's plans," he wrote. "Firstly and most importantly, we believe tech names will remain under selling pressure leaving Vision Fund's paper profits on names like Nvidia (NVDA) vulnerable to big under-performance relative to the fund's targets."

 
 
 

Mr Son has much at stake in his relationship with Saudi Crown Prince Mohammed bin Salman. Saudi Arabia has committed US$45 billion to the Vision Fund for technology investments and plans to put the same amount into the next Vision Fund. The Japanese company is also planning to support a planned US$200 billion solar project in the country.

Saudi Arabia's Future Investment Initiative, which has been nicknamed "Davos in the Desert", is due to start on Oct 23 and bills itself as "A Blueprint for the Twenty-Second Century." It's been hit by cancellations since news emerged that Khashoggi, a critic of his home country and writer for the Washington Post, hasn't been seen since visiting the Saudi consulate in Istanbul.

JPMorgan chief executive officer Jamie Dimon, Uber Technologies' Dara Khosrowshahi and Viacom Inc's Bob Bakish are among those that have dropped out of attending the conference. Bloomberg LP, the parent company of Bloomberg News, has also pulled out of the event as a media partner, a spokesperson said. A link to the list of speakers on the event's website no longer worked as of Monday.

Turkish officials say they have audio and video recordings that show a Saudi security team detained Khashoggi in the consulate before killing him and dismembering his body, the Post has reported. Saudi officials say Khashoggi left the building unharmed.