What is SoftBank?

and gentlemen this is masa of Softbank from Japan and he's just agreed to invest 50 billion dollars in the United States and 50,000 jobs and he's one of the great men of industry you may have seen this video of softbank's founder and CEO Masayoshi Son meeting with president-elect Donald Trump in December 2016 where he said he would invest 50 billion in the United States or you may have read about what appears to be soft banks failed 15 billion dollar investment and we worked the office sharing company what is confusing is what is this Japanese company seem to have more money than God and more recently why has its founder become the butt of many jokes however being called crazy is actually nothing new for softbank's founder and visionary Masayoshi Son this video will go through the story of Softbank and explain what it is before we start welcome to our channel the market is open please hit the like button at any time during the video if you're enjoying our content also check out our second channel TM IO Tesla which discusses Elon Musk's biggest company to understand Softbank we need to understand Masayoshi Son who was determined from a young age to be a business success without being invited in 1973 he took a plane to Tokyo and knocked on the door of his business idle to ask for advice actually he spent 15 minutes with me talking face to face he gave you some advice which was to learn yeah I asked what business should I do computer with technology and mine son then left his family at age 16 to move to the United States because he liked the American entrepreneurial spirit in university he had a plan to make money by focusing five minutes a day on what he felt would be the most lucrative use of his time five minutes if I focus I can come some idea I can make some idea so I set alarm clock five o'clock five minutes tick tick come invention come son used his business ABI to recruit to researchers to build his idea an electronic language translator he then sold the patent to sharp a Japanese corporation for over a million dollars with this success and a university education he returned to Japan in 1981 to start South Bank why the name soft bank so I aggregate all kinds of software from the small software houses and I wholesale to the you know PC stores so it's like a bank the software's bank in case his explanation wasn't clear South Bank was designed to be a wholesaler of software meaning it would buy software from smaller companies than resell it to larger companies at a higher price he hired two part-time employees and told them on their first day you guys have to listen to me because I am president of this company in five years I'm going to have 75 million in sales and in ten years we will be the number one PC software distribution company even then the company had zero sales at the time the employees thought he was crazy and they quit his next biggest business expansion idea was to buy the biggest booth at a 1981 Japanese trade show and pretend the South Bank was indeed a large company he recruited smaller software companies to be at his booth but these smaller companies ended up making sales through their own companies and not through Softbank and once again Massa was seemingly being laughed at however a few weeks later one high-profile client did sign up with Softbank and son used his client to advertise the company's success in size this helped it grow sales to a hundred and fifty thousand dollars within a month and to 15 million by 1982 by 1993 Softbank had four hundred and sixty five million in sales in addition son also expanded his company in the 1980s into computer magazines in 1994 it went public in Japan selling 3.7 million shares valuing the firm at 600 million masa used the excitement for tech in the mid-1990s to expand his empire and the American media soon began calling him the Bill Gates of Japan and Softbank began to make many large investments and in early 1995 it borrowed 500 million to buy Comdex which was the largest computer entertainment show at the time later that year he bought Ziff Davis for 1.8 billion who was a publisher of the most popular computer magazines while these investments ended up being unsuccessful with Softbank losing approximately 1 billion they were indicative of future deals for south bank and south bank would issue around 4 billion of debt to make these deals this debt provided him the capital to hit his first jackpot in 1995 when South Bank invested 100 million in Yahoo Sun actually had to convince Yahoo's founder Jerry Yang to take his money and I convinced Darien to take hundred million dollars his final investment in Yahoo ended up being closer to five hundred million dollars and he sold out most of this investment in the early 2000s for approximately three billion however what most people in the West may not realize South banks bigger gain would be on Yahoo Japan which is still today one of Japan's most powerful technology companies he did this by convincing Yahoo in 1996 to start a joint venture with South Bank but Sun demanded majority ownership Softbank ended up investing 1.2 million for 60% of the company today Yahoo Japan is worth over 20 billion and South Bank still owns more than 40 percent of it Yahoo Japan's future will be discussed later in the video by 1998 Softbank held stakes in 60 Internet related firms and it claimed to have said to 8% of the market value of all internet listed companies in addition it started a venture capital arm investors were excited with South banks prospects and the company's market value reached a peak of about a hundred and eighty four billion in 2000 Masayoshi likes to point out that Larry Ellison was actually for a couple of days richer than Bill Gates oh good yeah but you were there for three days yeah yeah did you tell everybody when you were the richest man in the world however softbank's legacy distribution business was no longer worth much as software wholesaling had gotten competitive and was no longer very profitable therefore its value was based on the belief that it would continue to get favorable deals like yahoo japan but this narrative would soon erode as American company stopped using Softbank for deals an example is Jeff Bezos Amazon's founder declining a partnership with South Bank though Softbank was still investing in January 2000 right before the tech crash it invested 20 million in Alibaba which has become one of the firm's most famous investments in 2020 Alibaba is the largest e-commerce company in the world and has a market value of nearly 600 billion son explains his rationale for this investment well he had no business plan and zero revenue employees maybe 35 40 employees but his eyes was very strong strong guys strong shining eyes I could tell this investment will be further discussed later in the video because in 2011 was an infant and Softbank had to be more concerned with the impending tech market crash by December 2008 stock was down about 90 percent to 18 billion in market value and many media outlets were very satisfied with softbank's apparent demise one academic said what happened with South Bank is just a manifestation of the overall trend in the industry because it threw money into money losing startups however despite rumors of its demise soft banks still had a war chest while its investment portfolio was down from its peak of 48 billion it was still worth about 10 billion and most of that was profit however South banks next investment would be on finding its own new business many doubted the company's strategy of making its third transformation South Bank had already been a software distribution company then an investment company and now it wanted to be a telecommunications company Wired magazine in a 2003 article called this a fat pipe dream this was because in 2001 the Japanese telecom industry was dominated by Nippon Telegraph and telephone or NTT which was part owned by the Japanese government Softbank described NTT as expensive and slow and son said he was prepared for battle but NTT restricted softbank's access to its network so in 2001 a frustrated son traveled to a Japanese politicians office and made a weird threat he said if you don't help me I'm going to pour gasoline all over myself and light myself on fire with this $1 lighter the government for whatever reason decided to help out Softbank in order to realize its goal Softbank also sold over 6 billion in investments from 2000 to 2004 and it poured billions into networking equipment in addition it lost over 200 million in 2002 and 800 million in 2003 son strategy was to lose money on initial customers in order to grow the business rapidly he priced softbank's broadband at a price far below its competitors and Wired magazine said the company seems like one of the most foolish dot-com plays selling a dollar for 80 cents and trying to make it up in volume but by late 2003 softbank's broadband losses were slowing and it now had 60 percent of the Japanese high-speed market this rapid revenue growth helps off.thank to expand and in 2004 it bought Japan Telecom for approximately three billion it did this to gain efficiencies and gain more business clients and it funded the acquisition with about 1.5 billion in debt and south bank's total debt reached close to 8 billion but softbank's transformation was not yet complete in 2005 it wanted to bet on the rapid growth of the mobile phone market even though the iPhone had not yet been invented son guests that Apple's Steve Jobs was working on a phone who can create the best weapon in the world I said it's only one guy Steve Jobs so did you call him up or did you go see him I called him up and went to see him and I brought my little drawing of iPod with you know mobile capability yes and I gave him my drawing and Steve says Massa you don't love me Massa you don't give me you a toy but the problem for his company was it did not yet have a mobile network but Jobs agreed with son that if he got one he would give Softbank exclusive access to his phone Softbank fulfilled this promise by buying Vodafone's struggling Japanese cell phone unit for fifteen point four billion in March 2006 this instantly made it Japan's third-largest mobile carrier with 15 million subscribers the purchase was massive related to Softbank size and it's that one from 8 billion to 25 billion in order to get this much debt to fund the deal Masayoshi had to use his persuasive powers then Vodafone Japan became available 20 billion dollars I had 2 billion dollars so 18 billion dollars short so where'd you get the money so I convinced the bank son convinced the bank that he could turn around Vodafone struggling unit and he was right by 2009 South Bank showed it was the third most profitable company in Japan in terms of operating income more importantly soft banks telecom business continued to succeed and it gained market share from 2007 to 2011 softbank's mobile business was becoming extremely profitable and the company averaged over 5 billion in operating income from 2007 to 2013 so with all this success how come soft bank is not viewed as a telecommunications company today in 2016 son wanted to turn Softbank back into more of an investment focus company which was a strategy that he had pursued in the late 1990s and many outsiders were noticing this transformation but what you're gonna see is Softbank as in Softbank group the parent rather than the Japanese phone business it's gonna become very much an investment company since I think now is more of an investment vehicle it has a series of pieces that make up the company let's go through the seven most valuable pieces of soft Bank soft Bank has sold over 19 billion of stock in Alibaba since 2016 and its latest deal was 11 billion of stock in 2019 despite these sales soft Bank still owns over 630 million shares worth over a hundred and thirty billion in the company in 2018 soft banks started to reduce some of its interest in its telecommunication business it sold about 33% of the business in late 2018 for 24 billion and in late May 2020 it sold a further three billion despite these sales it still owns about 62 percent of the telco business and its stake including the cash from the most recent sale is worth about 39 billion one final note is Yahoo Japan is now 50% owned by the telecommunications unit so the value of this business is now reflected inside this company as mentioned earlier Yahoo Japan continues to be a large player in the Japanese market and has continued to grow one of softbank's first big bets as an investment company was to buy the english semiconductor company arm holdings in 2016 south bank owns close to a hundred percent of the company but 25 percent of this investment is inside its vision fund which will soon be discussed Softbank paid about thirty 1 billion for the acquisition it has also shown its usual willingness to forego profits in order to invest in growth arms adjusted evide which is earnings before interest taxes depreciation and amortization has actually declined since Softbank has bought it but Softbank says this is because it has made large investments on the other hand arm based ships that have been shipped have increased rapidly since South Bank bought the company and major companies have recently increased the use of arm based ships son's bed unarm is a bed on an explosion of chips on smaller devices that in the future will be connected to the internet which is often referred to as the Internet of Things Softbank bought 80% of sprint in 2013 in early 2020 t-mobile and Sprint completed a merger making it a formidable competitor to AT&T and Verizon because of this merger Softbank now only owns about 25% of the new t-mobile company and it has plans to sell off most of this stick which is now worth about twenty nine billion Softbank also has special warns in the investment that will be explained in a caption below soft banks other investments are worth about 8 billion according to Sun this includes investments in other public companies or private companies controlled by soft bank finally let's talk about the controversial vision fund which is the largest venture capital fund in the world the vision fund is basically a hedge fund where son is investing on behalf of his company and some other notable investors including Saudi Arabia and Abu Dhabi the structure also uses leverage which means Softbank has some upside but it also has more downside if prices drop the vision fund gets a lot of media attention and is frequently criticized but it is not such a large piece of the company yet here are some of the companies that Softbank currently owns in its vision fund we have a future video plan called how much has Softbank lost this year where we plan to go through the most important vision fund Holdings including we work let us know in the comments or leave a like if you would like to see this type of video as of May 20 2000 Fink values its vision fund holdings at about 24 billion and from inception it shows the fun is down about 0.8 billion but given that many of these holdings are in private companies the fund may actually be down more or less since there's a lot of subjectivity in valuing private companies what can be said is Softbank heavily marked down the vision fund in 2020 so this estimate may be conservative the final thing is Softbank has about 30 1 billion dollars in cash on its balance sheet so that sums up what's off mink has but what is it oh we also want to show softbank's liabilities since Softbank has frequently been criticized for its debt Softbank it seems and say massa is the biggest risk taker he always has been he almost went belly-up in 2000 when the dot-com exploded and it could happen again because of how much debt you have on your balance sheet what did you say when you hear that thank you for worrying about me company Softbank has about a hundred and twenty-two billion of debt but we need to minus out the telecom companies debt and cash because the two companies separated in late 2018 I've also deducted estimated taxes that will need to be paid once off banks sells these holdings which is estimated to be 58 billion this lease off banks pieces with a total value of about a hundred and fifty eight billion which is far above its market price of about 90 billion in May 2020 the stock can be purchased on the Japanese exchange and the over-the-counter market in the United States we have attached a free sheet on our patreon page showing softbank's value calculation in addition this page has historical earnings results and an explanation of softbank's ticker symbols in the United States this is obviously not a recommendation to buy or sell Softbank stock however it does show how saw think may be undervalued and Masayoshi has discussed the company's undervaluation because many people do not understand what Softbank is we hope this video helps to explain Maceo she's canvassed not investing into the distressed asset I am investing at the beginning of paradigm shift when people still wonder when people still debate whether that new paradigm is coming or not sometimes people think it's too risky too fragile but I see the future paradigm shift is coming so that at the right at the beginning of the major paradigm shift we decide aggressively to make investment

Channel: The Market is Open

Views: 126,119

Keywords: SoftBank, Softbank, Masayoshi Son, Masayoshi, Japan, Tokyo Stock Exchange, Iphone, Steve Jobs, Technology, Vision Fund, VisionFund, Venture Capital Investing, Venture Capital, Bill Gates, Arm, Arm Holdings, Sprint, T-Mobile, Tech Investor, Masa, Software, Bank, Investing, Finance, Trading, Business, Japanese Business, Yen, Yahoo, Yahoo Japan, Donald Trump, Trump

Id: vd9PI2BkCTg

Length: 17min 54sec (1074 seconds)

Published: Fri May 29 2020