According to Oliver Matthew, CLSA’s Oliver Matthew, the current interest rate environment could favor Japanese conglomerate SoftBank Group’s strategy of long-term investment. It looks to buy earlier stage technology companies at lower valuations.
Matthew stated that SoftBank could end up “getting an even better deal” with the prices of potential acquisitions falling as investors brace themselves for higher rates.
However, he acknowledged that the stock was also affected by the fall in valuations for listed growth businesses this year. Higher interest rates can cause growth firms in tech to lose value, making their future earnings less attractive.
SoftBank’s Vision Fund has been a strong source of venture capital and invests in everything, from Uber to Alibaba. SoftBank was caught in the crossfire of Beijing’s ongoing regulatory crackdown in its domestic tech sector. SoftBank had to reduce its stakes in companies such as Uber to make up for those losses.
SoftBank shares – Arm IPO: A catalyst?
SoftBank Group Japan shares rose by nearly 6% Wednesday after the company revealed it would seek a listing for its Arm unit. The stock fell 3% in Thursday morning trading after some of these gains were trimmed.
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The Japanese conglomerate originally planned to sell Arm and Nvidia. However, the sale was halted by regulatory scrutiny.
The deal was announced in 2020 and is valued at $40 billion in Nvidia cash and stock. Arm will now prepare for a public debut in the fiscal year ending March 31, 20,23, with the sale off the table.
“When they did the deal to Nvidia, it wasn’t that simple because they were taking two thirds of the Nvidia stock price Matthew stated that SoftBank was extremely bullish on this matter, which we know. The Japanese conglomerate is likely looking for a higher valuation to allow Arm to go public “at quite decent prices.”
SoftBank bought Arm for $32 billion in 2016.