SoftBank Group's fiscal Q2 earnings presentation revealed that the company has been aggressively engaging in asset monetisation activities in recent months. The Japanese conglomerate has been divesting from key holdings, with notable sales in Nvidia and T-Mobile, to fuel its larger vision centred around AI innovation.
The Tuesday earnings release showed that SoftBank sold its entire Nvidia stake of 32.1 million shares in October for $5.8 billion (£4.4 billion). The company also offloaded 40.2 million T-Mobile shares for $9.1 billion (£6.9 billion) between June and September. Additionally, $2.3 billion (£1.7 billion) was generated from the settlement of collar transactions involving Deutsche Telekom shares, as well as the partial sale of Deutsche Telekom shares.
This month, the company increased its margin loan using Arm shares to $20 billion (£15.2 billion) from $13.5 billion (£10.2 billion), with $11.5 billion (£8.7 billion) of the credit facility remaining undrawn.
Real Reason Why SoftBank Is Going All In On OpenAI
In March, SoftBank decided to make follow-on investments in OpenAI Global of up to $40 billion (£30.4 billion), with $10 billion (£7.6 billion) syndicated to co-investors. Last month, the company elected to invest an additional $22.5 billion (£17.1 billion) via the SoftBank Vision Fund 2 in December. Upon completion of this investment, the Japanese firm's ownership in OpenAI will increase from 4% to 11%.
The stake sales and a realised gain of $19 billion (£14.4 billion) from SoftBank's Vision Fund helped the company double its profit in its fiscal Q2.
'The reason we were able to have this result is because of September last year, when we first invested in OpenAI,' said SoftBank CFO Yoshimitsu Goto during an investor presentation. He added that OpenAI's $500 billion (£380.3 billion) valuation is one of the largest in the world.
SoftBank could increase its investment in OpenAI further depending on performance milestones and valuation in future rounds, but sources told CNBC it is unlikely to seek ownership exceeding 40%.
'We want to provide many investment opportunities for investors while maintaining our financial strength,' Goto said. 'Through those options and tools, we make sure that we are prepared for funding in a very safe manner.'
Nvidia Shares Decline on SoftBank Exit
Nvidia shares fell nearly 3% on Tuesday after SoftBank announced its exit. However, Rolf Bulk, an equity analyst at New Street Research, believes this should not be seen as a cautious or negative stance on Nvidia. Instead, he explained that SoftBank's decision is driven by its need to raise a minimum of $30.5 billion (£23.1 billion) in fiscal Q3, including $22.5 billion for OpenAI and $6.5 billion (£4.9 billion) for US-based semiconductor firm Ampere.
SoftBank stated in its earnings release that it has already arranged a bridge loan of $6.5 billion for the Ampere acquisition.
Despite the Nvidia sale, SoftBank's businesses remain closely linked to Nvidia's technology, as it is involved in multiple AI ventures that depend on Nvidia, including the $500 billion (£380.3 billion) Stargate data centre project in the US.
Morningstar's Dan Baker noted that he does not see SoftBank's decision as a fundamental shift in strategy.
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Originally published on IBTimes UK
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