How SoftBank clawed its way to a surprise profit
SoftBank: Making a speedy recovery
In the month of May SoftBank's founder Masayoshi Son had gone on record to report his company's biggest loss in its 39 year history. He had even compared the Covid-19 pandemic to ‘The Great Depression’ as things were looking grim for his company since March. All that is a thing of the past now as SoftBank has recovered from its devastating loss in the first quarter. Its net income was $11.8 billion for the three months that ended on June 30. Here's a look at what led to this quick recovery.
Riding on Uber
This ride hailing company has been in trouble for some time with its profits going down along with its ridership, which was made worse by the Covid-19 pandemic. Uber had reported a net loss was $1.78 billion in the second quarter of 2020. But what worked in its favour was Uber Eats, which saw a surge and has now become the company's prime focus. The global revenue of Uber Eats stood at $1.2 billion in the quarter that ended in June. This helped its stock spring back by 11% in the June quarter and made a profit for SoftBank too. As the world starts opening slowly, Uber has said that it is seeing a surge in its ride hailing apps in France, Hong Kong, New Zealand and Sweden.
SoftBank's bets on Ola
A large part of SoftBank’s bet on startups are on ride-hailing companies like Didi Chuxing and Ola. In May SoftBank had led a fundraising round for Didi's self-driving unit. Ola Electric had raised $250 million from SoftBank in a Series B round funding last year. But the company suffered losses due to the pandemic and had to let go of its staff. However, what has helped SoftBank is that the surge in stock prices of Uber can be used as a benchmark for peers in the same industry. Hence, the rise in stock prices of Uber is now being used to write up valuations for both the ride-hailing startups – Ola and Didi.
Wait and watch
Online insurance platform Policybazaar has been in news recently with reports that Google was planning to acquire a minority stake in the SoftBank-backed company. This would be a part of Google’s goal to invest $10 billion in India over the next five to seven years. According to sources Google could invest about $150 million in the insurance startup. SoftBank holds a 15% stake in the company and it remains to be seen if it'll make a partial exit after making a profit from Google's investment. Meanwhile, Policybazaar has been planning to raise funds through IPO in 2021.
An IPO for Lemonade
SoftBank has a stake in online home insurance startup Lemonade which was founded in 2015. This company raised $319 million in its Initial Public Offering in the US last month. This makes SoftBank, which owns a 21.8% stake, now worth about $750 million, more than double its investment last year.
Making money on pharma
Relay Therapeutics Inc develops medicines for cancer patients. In 2018 SoftBank Vision Fund had invested $300 million and holds 41% stake in the company. The drug developer surged 75% in its trading debut after expanding its initial public offering to raise $400 million. The company sold 20 million shares for $20 apiece in a day.
Still in troubled waters
Ritesh Aggarwal co-founded Oyo, which has the backing of SoftBank, has been in trouble since the beginning of 2020 when it laid off thousands across India, China. Things took a turn for the worst during the pandemic. Oyo is one of the largest startups in SoftBank's portfolio. Things have started looking up for this company as it announced in early August that it will restore full salaries of employees with a fixed compensation of upto Rs 8 lakh and will gradually restore salaries of all other employees by December this year. But, it still remains to be seen if the company will regain its old glory back any time soon.