Tokyo-based SoftBank Group is one of the largest multinational corporations in the world. The firm has grown from a small computer parts store to the second-largest company in Japan, just behind Toyota. SoftBank’s reach extends across the globe and into many different industries.
In addition to being the majority shareholder of Sprint (S) and Boston Dynamics, SoftBank has made major investments in Yahoo, Alibaba, Uber and WeWork. SoftBank shares do not trade on American stock exchanges, so investors who want to buy SoftBank stock will need a brokerage with access to Japanese or OTC markets.
Is SoftBank Group worth the investment? The company has many high-profile winning bets like Alibaba and Yahoo but has also faced criticism for its business dealings with Saudi Arabia and its heavy debt load.
SoftBank Company and Stock History
SoftBank was founded in 1981 by Masayoshi Son, a 24-year old entrepreneur. Son became a millionaire during his time at school, thanks to a translator he sold to Sharp Corporation for $1.7 million. Son founded the SOFTBANK Corporation as a computer parts and repair store shortly after graduating from Cal in 1980.
SoftBank did not remain a small computer parts store for long. In 1982, Masayoshi Son brought SoftBank into the publishing industry with two different computer magazines: Oh! PC for NEC computers and Oh! MZ for Sharp products. These ventures were highly successful and Oh! PC had a circulation of over 140,000 by the end of the 1980s. But as the 1990s went on, Son became increasingly enamored with the internet and its capacity to change the entire world.
In 1994, SoftBank Group had its IPO and garnered an initial valuation of $3 billion. In less than 15 years, Son built his small computer store into one of the most powerful players in the tech industry. SoftBank dove deeper into the telecommunications and internet industries. The firm signed an agreement with internet sensation Yahoo in 1996 to bring the search engine to Japan. Yahoo Japan became the most popular site in the country within a few years.
SoftBank’s greatest investment was the $20 million it put into Chinese startup Alibaba shortly before the dot-com bubble burst in 2000. Despite losing a tremendous amount of his wealth in the bust, Masayoshi Son held on to his stake in Alibaba. In 2014, Alibaba went public and Son’s $20 million investment turned into a $60 billion windfall.
SoftBank continued to expand its telecommunications wing by purchasing a majority stake in Sprint Corporation for $22 billion in 2012. The FCC approved the move in 2013 and SoftBank assumed a 78% stake in Sprint.
The Vision Fund
SoftBank’s Vision Fund is a $100 billion venture capital fund aimed at late-stage startups. Vision Fund has been instrumental in providing funding to disruptors like Uber, WeWork, DoorDash and Slack. Son is highly involved in running the fund and demands a face-to-face meeting with each founder before investing any of the fund’s capital.
Established in 2016, Vision Fund now has investments in nearly 100 different companies from sectors like health technology, transportation logistics, real estate, and fintech. However, Son has faced criticism for taking money from Saudi Arabia’s sovereign wealth fund and Prince Mohammad Bin Salman to finance Vision Fund investments.
SoftBank Stock History
SoftBank went public in 1994 and trades on the Tokyo Stock Exchange. Japanese traders can find SoftBank shares under Issue 99840. SoftBank is a component of the Tokyo Stock Price Index 30 (TOPIX Core 30), which comprises the most liquid large-cap companies in Japan. When searching for SoftBank shares on an American brokerage or research platform, you’ll likely come across two different stock symbols: SFTBY and SFTBF. Both look similar, but one is a sponsored ADR and the other an unsponsored ADR (American depositary receipt).
Since SoftBank trades on the Tokyo Stock Exchange, U.S. traders can’t access common shares. However, banks can offer ADRs on the OTC markets to act as proxies for shares of the underlying company. In the case of SoftBank, SFTBY is an unsponsored ADR. An unsponsored ADR securitizes the underlying foreign company in the United States without their involvement.
In some cases, the underlying firm doesn’t even give permission for the unsponsored ADR to be created. SFTBF is a sponsored ADR, meaning that SoftBank’s equity supplies the underlying value of the asset. Sponsored ADRs have different levels as well. Level I sponsored ADRs can only be traded on the pink sheets while Level II sponsored ADRs can be traded on U.S. exchanges.
Both SFTBY and SFTBF can be purchased by American investors via OTC markets. As an unsponsored ADR, SFTBY gives investors no shareholder voting rights or privileges and the bank writing the ADR remains in control of it. SoftBank retains control over SFTBF as the sponsored ADR.
SoftBank is the second-largest publicly traded company in Japan after Toyota Motors, with a market cap over $100 billion. On July 11, the company announced a 2-to-1 stock split but didn’t lower the dividend payout. SoftBank is poised to be a leader in Japanese tech investment for many years to come.
Future Outlook for SoftBank
SoftBank is one of the hottest stocks in Japan right now and there’s plenty of reason for optimism. However, there are a few things to consider before buying shares of the Japanese giant, especially when it comes to Vision Fund’s business ties.
Why You Might Want to Buy It
- Dynamic leadership: Son is the type of rockstar CEO investors love to bet on. He’s hands-on, charismatic and full of optimism and pride for both his company and its investments.
- Strong investment theses: SoftBank has turned a number of high-profile investments into huge gains. Alibaba is the best example, but SoftBank has had tremendous success with its investments in firms like Uber, DoorDash, Yahoo and NVIDIA.
- Shift from telecom to tech: Telecommunications has always been the heart and soul of SoftBank, but it’s become increasingly focused on technology and advances in robotics, AI and machine learning. SoftBank has placed a number of bets that could pay off exponentially in the future.
Considerations Before You Buy
- Sketchy funding sources: SoftBank’s Vision Fund has received $45 billion from the Saudi Arabian sovereign wealth fund, which is primarily controlled by real-life James Bond villain Prince Mohammad Bin Salman. Bin Salman has been accused of war crimes by the Human Rights Watch group and has been implicated in the death of Saudi journalist Jamal Khashoggi by the United Nations.
- Heavy debt burden: SoftBank’s aggressive investment strategy has left the company with a large debt load and some analysts are beginning to question if current returns are being juiced at the expense of future profits. At the end of 2018, SoftBank had more than $158 billion (18 trillion JPY) in debt on its balance sheet and its acquisition of Sprint put the American telecom company’s bonds into junk status.
- Difficult to value: Is SoftBank a telecommunications company? An investment company? A technology company? With so many hands in so many cookie jars, it’s difficult to come up with a valuation for SoftBank Group. The company has a wide range of infrastructure in Japan, but it continues to invest in a multitude of different areas. Buying SoftBank shares is essentially a bet on Son’s vision.
How You Can Buy SoftBank Stock Right Now
Weigh the pros and cons before you buy. SoftBank shares can be accessed in the United States, but the company trades on the Tokyo Stock Exchange and isn’t subject to the same rules and regulations that public firms in the U.S. must adhere to. Always consider these differences when considering an investment in a foreign company.
Step 1: Figure Out an Investment Plan
SoftBank is a great stock to add to your portfolio if you’re looking for international exposure, but an investment plan is still needed before buying any shares. What are your goals with an investment in SoftBank? If you’re investing for short-term gains, your plan will look much different than a buy-and-hold investor who wants a decade of capital appreciation. Put your plan in writing, too! Have a hard copy you can refer to later if the stock hits a 7% decline and your sell finger gets itchy.
Step 2: Determine How Much Capital to Invest in SoftBank
After logging your investment plan, you’ll need to put your capital to work. You’ll need to assign a certain percentage of your portfolio to SoftBank shares. Use your investment plan to determine the specific amount. Never concentrate too much of your portfolio into a single stock.
Step 3: Select a Low-Cost Broker with Available SoftBank Shares
Finding SoftBank shares at American brokerage firms might require a little trial and error. Both the sponsored and unsponsored ADR are available on the OTC markets, but not all brokers carry both shares.
For example, TD Ameritrade has both SFTBY and SFTBF available for trade, but Robinhood only has SFTBY. Be sure to understand the implications of trading ADRs, including any potential currency exchange fees.
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Step 4: Determine an Entry Point
Once you’ve determined which type of SoftBank shares to buy, you’ll need to execute your trade. Many traders use technical analysis tools like support and resistance to estimate the best trade entry points. Use technical signals combined with your investment plan to determine the best possible entry point.
Step 5: Execute Your Trade
Purchase your shares. Make sure you have the correct stock symbol entered! SFTBY is the unsponsored ADR of SoftBank shares, meaning the bank issues without the company’s compliance. SFTBF is the sponsored ADR where SoftBank retains control of the shares.
Know What You’re Buying With SoftBank
SoftBank is an exciting name in the telecom and tech space, but the firm’s common shares trade on the Tokyo Stock Exchange. Investors in the United States who want to trade SoftBank shares will need to purchase a sponsored or unsponsored ADR, which comes with its own set of pros and cons. Make sure you understand the risk and reward of this type of trading before investing any capital into SoftBank Group.