Just as investors at SoftBank Group Corp thought Masayoshi Son was at risk, Japan’s foray into highly leveraged derivatives gives them new reasons to worry.
SoftBank’s shares fell 7.2 percent in Tokyo to erase the market value of around USD 9 billion. The decline occurred following massive investments by the conglomerate in high voltage equity derivative equity stocks and despite a report of billions in paper gains.
Son’s career was full of major and strategic changes, but he spent much of this year taking investor-friendly measures which made it look like he was finally listening to shareholders such as activist Elliott Management Corp. His latest step has affected SoftBank’s concern that it is engaged in another risky endeavor that could lead to losses like those in the WeWork company. Son himself leads the trade of options with a small staff who are familiar with the matter and execute his ideas.
Son announced earlier this year that he would sell assets worth 4.5 trillion yen and purchase 2.5 trillion yen of the SoftBank’s stock after WeWork mistakes and coronaviral outbreaks to recover from its drop. Actions have more than doubled in March, reaching the highest levels in the last month’s two decades.
The Financial Times reported SoftBank’s spending on Tech inventories with a total exposure of around USD 30 billion for around USD 4 billion. The company’s print profits amount to approximately USD 4 billion in profits from this stake.
Since SoftBank was founded in 1981, Son has experimented with dozens of companies. Before expanding into telecommunications and startups, he began his work in software distribution, trade shows, and magazines. His reputation has been developed by participating in hundreds of young companies including Alibaba Group Holding Ltd., the Chinese electronic commerce giant.
The idea that any single buyer could lead to market swings has in the past drawn skepticism concerning SoftBank’s possible impact on the more wide-ranging stock market. Several analysts have noted the relatively small volume of large institutions compared to the rest of the market.
However, as volumes have increased over the summer in certain stock options, several analysts start revising their ideas.
SoftBank is somewhat reputed to take big one-way bets. It would not surprise me if market participants looked at what they were doing – throwing around a large exposition, and attempting to some extent drive their coattails, “said Ilya Spivak, DailyFX ‘s head of the Asia Pacific strategist.
The news that SoftBank’s position has brought rise to market uncertainty, with questions about Son’s exposure and future trading plans.Jim Reid, the global strategist of Deutsche Bank AG, wrote in a note. “Experience tells you that we haven’t heard the last story and that there are often unsound consequences for such businesses. What is more about this story, it seems, is the trend for traders to exploit their new knowledge.”