By Gina Lee
Investing.com – Softbank (OTC:SFTBY) Group Corp. (T:9984) shares took a tumble on Thursday after the Japanese conglomerate decided against extending its buyback program. The decision also raised concerns about frothy portfolio valuations that outweighed the company’s recent record earnings.
Shares were down 6.55% to JPY8579 ($78.6) by 12:50 AM (4:50 AM GMT), after falling up to 8% earlier in the session.
SoftBank completed a JPY2.5 trillion ($22.9 billion) buyback on Wednesday, although Chief Executive Masayoshi Son said further repurchases could be possible.
SoftBank reported record profit after its portfolio company, South Korean e-commerce firm Coupang Inc. (NYSE:CPNG), listed on the New York Stock Exchange in March 2021. However, shares of investments including Coupang and DoorDash Inc. (NYSE:DASH) have since plummeted thanks to a recent tech selloff, and top asset Alibaba (NYSE:BABA) Group Holding Ltd. (HK:9988) is currently caught in a regulatory crackdown in China.
"Without the buyback, SoftBank's stock price is likely to reflect the performance of its listed investments," Jefferies (NYSE:JEF) analyst Atul Goyal said in a note, adding he was "extremely surprised" SoftBank did not extend the program.
Thursday’s slide in SoftBank shares extends the week's decline to 17% and concerns those valuations are too high amid record-low interest rates persist.
Coupang, the largest asset in the Softbank Vision Fund portfolio, is expensive compared to peers and "despite the intense sell-off there is no valuation driven bottom in sight," LightStream Research analyst Mio Kato wrote on the Smartkarma platform.
Doordash and Uber Technologies (NYSE:UBER) are "also unsustainably valued," Kato added, due to both companies’ loss-making business models and Uber’s worsening debt position.
However, Softbank is now looking ahead to a robust pipeline of startups preparing to list. The company’s Vision Fund 2, which invests smaller amounts than its first fund, has completed or approved investments in almost 100 startups.