After 21 years, SoftBank Group Corp. is back on top.
Shares of the Japanese tech investor on Tuesday surpassed the peak they hit on Feb. 18, 2000, at the height of the dot-com bubble. They closed at 10,420 yen, equivalent to $98.96, which was almost double their price a year ago, and topped the old split-adjusted record of ¥10,111.1.
Much about the SoftBank of two decades ago would look familiar to investors today, starting with its guiding principle of betting big on the next tech revolution. Then, as now, global stock markets were on a tear, startups were listing at eye-popping prices, and SoftBank was building a huge stable of private companies.
“Structurally, we’re at the beginning of the AI [artificial intelligence] revolution, just as we were at the beginning of the internet revolution” in 2000, SoftBank Chief Executive Masayoshi Son said at a press conference in Tokyo last week where the company reported around $11 billion in quarterly profit.
The differences are important too. Analysts say today’s SoftBank, known for its $100 billion Vision Fund, is more capable of withstanding market turbulence, even if stocks take a dive again.
Its market valuation of more than $200 billion is underpinned by its two biggest investment holdings, Chinese e-commerce giant Alibaba Group Holding Ltd. and SoftBank’s Japanese telecom unit, both of which have sizable revenue and profits of their own. Those two companies together accounted for around 56% of SoftBank’s equity holdings as of the end of December, according to SoftBank documents.
The companies in SoftBank’s portfolio that are getting ready to go public, such as South Korean e-commerce company Coupang, are for the most part larger and more mature than those in the 2000 portfolio, with promise of greater windfalls.
Mr. Son has “invested in assets that have cash flow and are self-sustaining and will continue to grow,” said David Gibson, an analyst at Astris Advisory Japan.
Following SoftBank’s stellar earnings last week, Mr. Gibson raised his target price for SoftBank’s stock to ¥11,000 from ¥10,000. He is trying to figure out how much longer the stock’s wild ride will last.
Japan’s overall market is healthy. The benchmark Nikkei 225 on Tuesday hit a level last seen in August 1990.
But the volatile history of both the Nikkei and SoftBank give reason for pause. After SoftBank’s record in 2000, a global meltdown in tech stocks sent its share price crashing to around 7% of its peak level and reduced the value of Mr. Son’s personal stake by tens of billions of dollars. The company’s stock price languished for much of the last 20 years.
Then when the pandemic hit early last year, the stock went on another scary swoon. With a nudge from hedge fund Elliott Management Corp., a major SoftBank investor, Mr. Son again pulled out a recovery in part through share buybacks.
Some analysts say that for all of SoftBank’s current strengths, its shares can only continue rocketing up for so long.
“It won’t be easy to continue the kind of share-price appreciation we’ve seen in the past year,” said Masahiko Ishino, an analyst at Tokai Tokyo Research Institute, noting that SoftBank’s stock price has roughly quadrupled since its low in March of 2020. SoftBank is now trading higher than Mr. Ishino’s target price of ¥10,000, which he set at the end of 2019 when many investors thought it was optimistic, he said.
Back in 2000, the brash Mr. Son was rapidly investing in private tech companies. He already had stakes in several hundred and was talking about plans to sink $1 billion into more than 1,500 in the next few years. He spoke of building an internet zaibatsu, a term for an old-style Japanese industrial group, and sometimes described his empire as a giant amoeba that was propagating internet ventures around the world.
Mr. Son was also trying to build a tech-finance empire. In 2000, SoftBank led a consortium that bought a struggling Japanese bank and joined forces with the company now called Nasdaq Inc. to start an arm in Japan.
News that SoftBank’s consortium was likely to be tapped to buy the bank hit just days before the company’s February 2000 share-price peak, propelling SoftBank’s stock upward. On that day, SoftBank shares accounted for nearly a quarter of the total value traded on the first section of the Tokyo Stock Exchange.
But the dot-com bubble soon burst. Within a few years, SoftBank had sold its stake in the bank, and Nasdaq pulled out of Japan. For a while Mr. Son focused on running a telecommunications business.
In recent years, Mr. Son has returned to his first love and talked about investing in a fleet of unicorns, or startups valued at a billion dollars or more. His investments include big players such as Uber Technologies Inc., and seem poised to keep a dominant position for years to come.