SoftBank founder Masayoshi Son adds US$4 billion to his wealth on Arm’s 192% rally

Masayoshi Son has added about US$3.8 billion to his net worth this year as the surging stock price of Arm Holdings bolsters the value of his holdings in SoftBank Group.

The pace of increase in his wealth puts the Japanese billionaire in the top 30 gainers among the world’s 500 richest people tracked by the Bloomberg Billionaires Index. The 66-year-old founder of SoftBank was worth US$15.1 billion as of Tuesday, compared with US$11.3 billion at the end of last year.

Son is personally benefiting from Arm’s rally because he owns roughly a third of SoftBank, which holds 90 per cent of the UK chip designer. Arm extended its three-day rally to 90 per cent after its earnings report last week showed spending on artificial intelligence (AI) is boosting sales. The stock has now almost tripled from its initial public offering price of US$51. SoftBank shares are trading near a three-year high.

“As long as its assets hold up their gains, people are not going to say SoftBank is over priced,” said Masahiro Yamaguchi, senior market analyst at SMBC Trust Bank. “For Arm, the stock surge may look overheated but if you think this will be backed by solid earnings growth in the future, it doesn’t feel out of place.”

Arm gave a bullish forecast when it reported financial results last week, suggesting the company can push beyond its traditional smartphone business into AI and other promising markets. Yamaguchi said investors are likely to take cues from Nvidia’s earnings next week to gauge whether the latest gains have been excessive.

To Victor Galliano, an independent analyst who publishes on Smartkarma, Arm’s current level prices a “super-premium” as Nvidia trades on less than half the prospective earnings multiple for a very similar forward earnings-per-share growth. Kirk Boodry of Astris Advisory also notes Arm’s multiples are already “eye-wateringly rich.”

SoftBank shares continue to trade at a significant discount to its net asset value (NAV) as the Vision Fund unit accounts for a chunk of the technology investor’s total holdings. The second Vision Fund remains mired in losses after a post-pandemic slump hurt tech valuations worldwide. Galliano estimates the two Vision Funds to account for about 25.3 per cent of NAV, while Arm accounts for a whopping 48.4 per cent.

SoftBank’s Arm soars after successful IPO despite China risks

Son remains personally on the hook for about US$5.3 billion on side deals he set up at SoftBank to boost his compensation, according to Bloomberg calculations based on company disclosures. Portfolio losses linked to the Vision Fund 2 stood at US$2.9 billion, and US$556 million for the Latin America fund, according to disclosures for the December quarter. His remaining deficit at SB Northstar was 259.7 billion yen (US$1.8 billion).

The billionaire holds 17.25 per cent of a vehicle set up under SoftBank’s Vision Fund 2 for its unlisted holdings, as well as 17.25 per cent of a unit within the company’s Latin America fund, which also invests in start-ups. He indirectly holds a 33 per cent stake in SB Northstar, a vehicle set up at the company to trade stocks and derivatives.

The Vision Fund 2 is the second-largest contributor to SoftBank’s equity value – accounting for about 14 per cent – and any markdowns pose a risk, Galliano said in a note published on Smartkarma.

“A radical, positive shift in the fortunes of the SVF2 holdings is needed to lower Masa’s IOUs with SoftBank, which seems unlikely, in our view,” he said.