Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

<ul>
<li>
Increasing Systemic Risks:Events are moving quickly and the fluidity of this pandemic has created a destructive amount of market volatility, which likely is the new normal given issues Quant Funds, illiquidity, the lack of US preparation and global leadership, and the corporate bond market are all becoming systemic risks.</li>
<li> Global Recession Already Underway: A global recession is already well underway, which should worsen given how much this pandemic is having on consumer confidence.  </li>
<li>Financial Stability Called Into Question:The global market rout is calling financial stability into question. This crisis of confidence and increased likelihood of waterfall of losses that will make for a VERY toxic cocktail – especially considering that many names are still not profitable on an operating basis.   </li>
</ul>



Increasing Systemic Risks:Events are moving quickly and the fluidity of this pandemic has created a destructive amount of market volatility, which likely is the new normal given issues Quant Funds, illiquidity, the lack of US preparation and global leadership, and the corporate bond market are all becoming systemic risks.
 Global Recession Already Underway: A global recession is already well underway, which should worsen given how much this pandemic is having on consumer confidence.  
Financial Stability Called Into Question:The global market rout is calling financial stability into question. This crisis of confidence and increased likelihood of waterfall of losses that will make for a VERY toxic cocktail – especially considering that many names are still not profitable on an operating basis.   


Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

Softbank's share buyback could have less of an impact on the holding company discount than previous efforts thanks to volatility in its US holdings. Two of Softbank's largest investments, Uber and WeWork at c. $18bn invested so far, face clear threats to the business model from reactions to the virus whilst others like Grab, Didi and DoorDash could also be impacted. One could argue that exposure to eCommerce (Alibaba, Coupang, Tokopedia) and health care (Guardant Health, Vir Biotechnology) may provide some offset but a move to a risk-off environment could mitigate the benefits of diversification.  The near term share price impact depends on the speed of repurchase as Softbank has generally worked quickly to buy in shares once it has decided to do so but the speed of market/social changes indicates a longer-term narrowing of the discount will be a harder ask.

Softbank's share buyback could have less of an impact on the holding company discount than previous efforts thanks to volatility in its US holdings. Two of Softbank's largest investments, Uber and WeWork at c. $18bn invested so far, face clear threats to the business model from reactions to the virus whilst others like Grab, Didi and DoorDash could also be impacted. One could argue that exposure to eCommerce (Alibaba, Coupang, Tokopedia) and health care (Guardant Health, Vir Biotechnology) may provide some offset but a move to a risk-off environment could mitigate the benefits of diversification.  The near term share price impact depends on the speed of repurchase as Softbank has generally worked quickly to buy in shares once it has decided to do so but the speed of market/social changes indicates a longer-term narrowing of the discount will be a harder ask.

Softbank Group: Buyback Upside May Be Mitigated by Pandemic Worries

Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<ul>
<li>Oyo China is 'default dead' in our view, using the words of Paul Graham of Y Combinator. They just don't know it yet in our opinion.</li>
<li>Oyo's China troubles will further impact Softbank shares as they represent a crisis of confidence in Softbank.</li>
<li>Despite news of a US$5bn buyback we believe Softbank shares continue to be at risk of significant downside.</li>
<li>Even a deep discount to NAV is not cheap when the market is worried that your company "turns dollars into nickels." Value destroyers deserve very deep discounts to NAV.</li>
</ul>


Oyo China is 'default dead' in our view, using the words of Paul Graham of Y Combinator. They just don't know it yet in our opinion.
Oyo's China troubles will further impact Softbank shares as they represent a crisis of confidence in Softbank.
Despite news of a US$5bn buyback we believe Softbank shares continue to be at risk of significant downside.
Even a deep discount to NAV is not cheap when the market is worried that your company "turns dollars into nickels." Value destroyers deserve very deep discounts to NAV.


Softbank's Unspoken Problem: Oyo China Is Now "Default Dead"

Softbank is trading down as the near-record stock market declines in the US roll into Japan.  With an 8% overnight decline in the Vision Fund's public portfolio, quarter to date losses are now in the red and with similar concerns on private valuations, it is almost assured that the Vision Fund will report a third consecutive quarter of operating losses.  The recent selling has more than wiped out the upside from Elliott and Sprint last month on both an absolute (-34% from 21/24 Feb high) and relative basis (holdco discount of 56% v 42%).  There are green shoots of good news (Sprint/TMUS are inching closer to actually merging, yen strength has moderated, Chinese tech has sold off less than global peers) but we expect volatility in the discount to continue as markets try to come to grips with the coronavirus issue. As always, a Softbank share buy back would be the most obvious route to narrowing the discount but there is little evidence that management is headed that way.

Softbank is trading down as the near-record stock market declines in the US roll into Japan.  With an 8% overnight decline in the Vision Fund's public portfolio, quarter to date losses are now in the red and with similar concerns on private valuations, it is almost assured that the Vision Fund will report a third consecutive quarter of operating losses.  The recent selling has more than wiped out the upside from Elliott and Sprint last month on both an absolute (-34% from 21/24 Feb high) and relative basis (holdco discount of 56% v 42%).  There are green shoots of good news (Sprint/TMUS are inching closer to actually merging, yen strength has moderated, Chinese tech has sold off less than global peers) but we expect volatility in the discount to continue as markets try to come to grips with the coronavirus issue. As always, a Softbank share buy back would be the most obvious route to narrowing the discount but there is little evidence that management is headed that way. 

Softbank G: Pandemic Read Across from Vision Fund Losses, WeWork Worries Drive Discount Higher

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Lifestyle International Holdings / Credit

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-27445'>Softbank Corp</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Softbank Corp

Japan

SoftBank Group Corp. provides telecommunication services. The Company also operates ADSL (Asymmetric Digital Subscriber Line) and fiber optic high-speed Internet connection, e-Commerce businesses, and Internet based advertising and auction businesses.

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Softbank Group (9984 JP)

Toxic Cocktail

Increasing Systemic Risks:Events are moving quickly and the fluidity of this pandemic has created a destructive amount of market volatility,...

Thomas J. Monaco

Softbank Group: Buyback Upside May Be Mitigated by Pandemic Worries

Softbank's share buyback could have less of an impact on the holding company discount than previous efforts thanks to volatility in its US...

Kirk Boodry

Softbank's Unspoken Problem: Oyo China Is Now "Default Dead"

Oyo China is 'default dead' in our view, using the words of Paul Graham of Y Combinator. They just don't know it yet in our opinion. Oyo's China...

Vincent Fernando, CFA

Softbank G: Pandemic Read Across from Vision Fund Losses, WeWork Worries Drive Discount Higher

Softbank is trading down as the near-record stock market declines in the US roll into Japan. With an 8% overnight decline in the Vision Fund's...

Kirk Boodry

Morning Views Asia: Softbank Corp

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

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