SoftBank faces leverage test after 60% share drop

SoftBank Group shares have fallen about 60% since June, the Financial Times reported on Nov. 9, as founder Masayoshi Son’s AI strategy comes under pressure before Tuesday’s half-year earnings.

The Nov. 9 report said the decline has lifted SoftBank’s loan-to-value ratio, a leverage measure comparing debt with asset values, to an estimated 18% to 22%, up from 13% at the end of June, according to analysts cited by the newspaper.

The reversal matters because Son has concentrated SoftBank’s portfolio around artificial intelligence infrastructure, robotics and chips. That focus helped drive the stock higher during the AI boom but leaves the Japanese investment group more exposed when listed holdings fall and credit conditions tighten.

Arm, the UK chip designer that is one of SoftBank’s major holdings, has also fallen about 60% since June, the Financial Times reported. Analysts cited by the newspaper estimated SoftBank may still have $10 billion to $26 billion of funding capacity, with leverage below the company’s normal 25% target.

“With SoftBank, it’s all higher risk, higher reward,” David Dai, an analyst at Bernstein, told the Financial Times. “You could say in the past that SoftBank was a more diversified investment company, but now all the investments are centred around the same ecosystem of AI . . .

there is nothing defensive in there.”

The pressure has widened after a broader retreat from AI-linked technology shares. Atlas360 reported on Nov. 7 that South Korea’s Kospi slid 9% after a $2.5 trillion Wall Street tech sell-off, with losses in Nvidia and other chipmakers showing investors questioning AI infrastructure spending.

The Financial Times linked additional political uncertainty to the Democrats’ victory in the US midterm elections, saying the result exposed risks around AI infrastructure projects, especially in Texas, where SoftBank is planning some of its largest data-centre developments.

SB Energy, SoftBank’s US energy infrastructure business, may have to delay a planned listing at a $50 billion valuation, the Financial Times reported, citing people familiar with the situation. One of those people told the newspaper: “What’s just happened in the US may mean testing how long SB Energy can go without going public.”

SB Energy is important to Son’s wider plan because OpenAI, to which SoftBank has committed about $65 billion, is expected to be a major customer for the company’s data-centre power projects, according to the report. That commitment is nearly six times SoftBank’s record $11 billion junk-bond issuance in September, according to Atlas360 calculations.

SoftBank is also expected to join an OpenAI funding round that could value the ChatGPT maker at $1.25 trillion, the Financial Times reported. Investors were already concerned about a delay to OpenAI’s initial public offering until next year, and the newspaper said attention is also on rival Anthropic’s potential listing.

SoftBank’s plans face other constraints. China has blocked its attempted acquisition of ABB’s robotics business through a national security review, and SoftBank is examining whether a solution such as separating the China business could work, the Financial Times reported.

The group’s five-year credit default swaps, which measure the cost of insuring debt against default, have risen sharply, the newspaper said. Analysts cited by the Financial Times said investors have limited appetite for more SoftBank funding after the September bond sale.

Son is still pursuing expansion. SoftBank is in talks to buy Allied Universal, a security services company, in a transaction said to be worth close to $30 billion including debt, the report said. Financing could include a new vehicle provisionally called the Transformation Fund, backed by Gulf investors.

“Do I think this will change Masa’s investment process? No, as he is investing for multiple decades,” David Gibson at MFT Financial told the Financial Times. “Does it give him caution?

To some degree, probably. SoftBank might take the foot off the pedal — but it won’t change the direction.” SoftBank declined to comment to the newspaper.

SoftBank reports half-year earnings on Tuesday, Nov. 10. Investors will be watching its loan-to-value ratio, available borrowing capacity and any update on SB Energy, Roze, OpenAI exposure or planned acquisitions.

OpenAI’s IPO timetable is a 2027 marker after the Financial Times reported that a delay until next year had already concerned investors. Anthropic’s potential listing is another check on whether private AI valuations can support SoftBank’s assumptions.