Softbank Tag

SoftBank CEO Masayoshi Son Banks on Exponential Growth

in Analysis

I am about to go out on very thin ice. I am a value investor, but I’ll probably get banned from the value community for what I am about to say: Current valuations don’t mean much for companies in industries that are entering an exponential growth phase. As I type this, I catch myself thinking that it sounds so “dot-commish,” but bear with me as I try to bring my statement into a more familiar value framework. Wall Street hates SoftBank’s recent decision to purchase ARM Holdings for £24.3 billion ($32 billion) — at a whopping 48 times earnings! SoftBank is paying a 43 percent premium for an already richly priced stock, and it doesn’t have any synergies with the U.K.-based supplier of semiconductor intellectual property — there are no costs to cut or additional revenue to capture by adding ARM to its existing businesses. Masayoshi Son, SoftBank’s founder and CEO and the reason my firm owns SoftBank stock, is not liked today as a result of the deal. I heard this (understandable) reaction from a friend about Son and the ARM purchase: “a bored rich man who needs to spend because he has too much.” To understand this acquisition, we need...

Buying Warren Buffett, Richard Branson and Steve Jobs at a Discount

in Analysis

What would you get if you crossed Warren Buffett, Richard Branson and Steve Jobs? Answer: Masayoshi Son, the Korean-Japanese, University of California, Berkeley–educated founder of one of Japan’s most successful companies, SoftBank Corp. Just like Buffett, Son is a tremendous capital allocator with a very impressive record: Over the past nine and a half years, SoftBank’s investments have had a 45 percent annualized rate of return. A big chunk of this success can be attributed to one stock: Chinese e-commerce giant Alibaba, a $100 million investment SoftBank made in 2001 that is worth about $80 billion today. Though you may put Alibaba in the (positive) black swan column, Son’s success as an investor goes well beyond it — the list of his investments that have brought multibagger returns is very long. Today, at the tender age of 57, he is the richest man in Japan, and SoftBank, which he started in 1981 and owns 19 percent of, has a market capitalization of $72 billion. Son, like Apple co-founder Jobs, is blessed with clairvoyance. He saw the Internet as an amazing, transformative force well before that fact became common knowledge. In 1995 he invested in a then-tiny company, Yahoo!, earning six times his...

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