Following the Japanese investment firm SoftBank Group Corp reporting a significant loss at its Vision Fund investment arm for a third consecutive quarter, shares of the company fell sharply on Monday.
Early afternoon trading saw a 13% decline in the shares, setting them up for their biggest one-day loss in more than two and a half years.
Analysts claimed that the share price decline was partially a reversal from a sharp rally that had been sparked by expectations of additional share buybacks. SoftBank shares had increased by more than 40% as of Friday’s close.
“Various expectations including another round of share buy-backs had pushed their share prices higher, and now they are in an adjustment phase,” SBI Securities analyst Shinji Moriyuki said.
SoftBank announced the conclusion of its plan to spend 400 billion yen ($2.88 billion) to buy back its own shares just one day before Friday’s quarterly results.
We were expecting an announcement of another round of buybacks, but none came, said Atul Goyal, a Jefferies analyst.
Market analysts claimed that concerns about weakness in technology stocks are another issue weighing on SoftBank shares, which heavily invests in the expansion of high-tech businesses.
“The outlook for IT (information technology) companies is dim amid the slowing global economy,” Shigetoshi Kamada, general manager at the research department at Tachibana Securities.
“Expectations for SoftBank Group’s growth have been shrinking as there is a concern that value of its portfolio companies may not grow in this environment.”
As the value of its portfolio continued to decline, The Vision Fund reported investment losses of 1.38 trillion yen ($9.9 billion) in the three months leading up to September 30. View More
But SoftBank as a whole, helped by reducing some of its stake in China’s Alibaba Group Holdings, reported its first quarterly profit in three quarters.
SoftBank shares were still up 11% year to date, outperforming the tech-heavy Nasdaq’s decline of 27.6% and the Nikkei average’s decline of 2.6%.
(Adapted from GadgetsNow.com)