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5 things to watch at SoftBank's earnings announcement

Questions on IPO fiasco and a second Vision Fund await Masayoshi Son

Masayoshi Son, chairman and CEO of SoftBank Group, will announce third-quarter earnings on Feb. 6. (Photo by Shinya Sawai)

TOKYO -- Masayoshi Son can expect a grilling when he announces SoftBank Group's third-quarter earnings on Wednesday. The Japanese tech conglomerate has had a wild ride over the past several months, and its chairman and CEO will likely be called on to address issues ranging from a disappointing IPO to the future of its Vision Fund.

Here are five things to watch.

What has SoftBank learned from the IPO fiasco?

SoftBank Corp., the mobile unit of SoftBank Group, will announce earnings on Tuesday, a day before the parent company. It will be the first earnings announcement since it listed on the Tokyo Stock Exchange on Dec. 19.

The initial public offering was a huge payday for the parent, which raised some 2.3 trillion yen ($21 billion) by selling a third of its stake. It was the second-largest IPO in history, but the good news did not last, as shares fell 15% on the first trading day. Investors will be watching how Son uses the massive proceeds, as well as whether he can rebuild the trust of disappointed retail investors.

SoftBank Corp.'s earnings are an equally important topic, as the telco remains the group's core cash cow. The mobile unit is expected to log 700 billion yen in operating profit for the fiscal year through March, up 10% from a year earlier.

What does the Huawei hubbub mean for SoftBank?

The arrest of Huawei Technology CFO Meng Wanzhou, which came against the backdrop of rising tensions between the U.S. and China, has become a lingering concern for SoftBank Corp., the only major Japanese mobile carrier supplied by the Chinese telecommunications equipment maker. SoftBank has said that in the worst-case scenario, it may cost up to 100 billion yen to replace Huawei equipment in Japan.

Huawei is not the only potential risk on the horizon -- SoftBank is also awaiting regulatory approval to merge its U.S. mobile carrier Sprint with T-Mobile. It hopes to complete the deal in the first half of this year.

Can SoftBank handle fluctuations in tech valuations?

SoftBank Group's earnings are increasingly influenced by the value of its investments. Operating profit in the January-June period was buoyed by the rise in the value of its stakes in U.S. chipmaker Nvidia and Indian budget hotel chain operator Oyo. Since the end of September, however, Nvidia's market capitalization has dropped by about half.

What about WeWork?

One particular investment likely to be in the spotlight is WeWork. In January, SoftBank pumped $2 billion into the U.S. coworking space provider. This was reportedly a significant reduction from plans to jointly invest up to $16 billion into WeWork along with the Vision Fund. The embarrassing IPO of SoftBank's mobile unit and pushback from Vision Fund investors are said to have played a role in the more modest investment. Now there are questions as to whether SoftBank will continue supporting the loss-making company and whether WeWork will need to go public soon to keep expanding.

Is the next $100 billion fund coming soon?

Son has said it will take no more than five years to use up all the money in the Vision Fund and that he wants to set up equally bigger funds at a faster pace. Despite the reduced investment in WeWork, the Vision Fund has been investing aggressively, and its portfolio now includes more than 50 companies. Investors are watching for updates on a potential Vision Fund 2. In November, Son said the decision was put on hold after Saudi Arabia was accused of ordering the murder of journalist Jamal Khashoggi. Saudi Arabia's sovereign wealth fund is a major backer of the original Vision Fund.

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