TOKYO -- SoftBank Group's share price rally ended abruptly on Monday after the collapse of one of its investments raised fresh worries over the quality of the technology group's assets.
SoftBank's stock price fell more than 10% early on Monday after gaining 45% last week on its announcement that it will sell or cash in $41 billion in assets. The company's shares closed down 5%.
U.K.-based satellite operator OneWeb filed for Chapter 11 bankruptcy protection on Friday in the U.S. SoftBank is said to have invested about $1.9 billion in OneWeb and owned nearly 40% of its shares.
Some analysts said the collapse of OneWeb raised concerns over the financial health of SoftBank's unlisted assets, especially at a time when SoftBank appears to be preparing for a sale of blue chip assets, potentially including holdings in Chinese e-commerce giant Alibaba Group Holding and mobile unit SoftBank Corp.
"If SoftBank sells high quality assets like Alibaba, it may be left with a lot of unstable investments," said Tomoichiro Kubota, an analyst at Matsui Securities. He pointed to U.K. chip designer Arm Holdings, which SoftBank acquired for more than $30 billion in 2016, as an example of an asset whose current value is unclear. Arm's revenue for the first three fiscal quarters has been flat compared with a year ago, according to figures published by SoftBank.
SoftBank declined to comment on the impact of One Web's Chapter 11 filing on the group's earnings. Financial results for the December to March quarter are usually announced in May. As of December, SoftBank pegged the value of Arm at 2.7 trillion yen ($25 billion) and its stake in the nearly $100 billion Vision Fund at 3.1 trillion yen. Another 1.1 trillion yen is categorized as "others."
The group's most valuable holdings are its stakes in Alibaba, worth about 13.7 trillion yen, and SoftBank Corp., worth about 4.5 trillion yen.
The concerns highlight the challenges for SoftBank in shoring up investor confidence as the spread of the coronavirus pandemic stems risk appetite across global financial markets.
In a statement on Friday, OneWeb said it was "close to obtaining financing" but "financial impact and market turbulence" related to the pandemic hampered progress.
SoftBank CEO Masayoshi Son has spent decades making risky bets on technology. He has maintained a series of policies to protect the group during a crisis, such as keeping net debt below 35% of the value of its investments even during "abnormal" periods and a pledge not to bail out of its investments. On March 23, SoftBank said it would spend the proceeds from the asset sale on buybacks and cutting debt instead of making new investments.
SoftBank has even signaled that it is prepared to walk away from previously announced funding plans, in a move that is raising tensions at U.S. coworking space company WeWork.
SoftBank recently notified WeWork shareholders that a $3 billion tender offer to buy shares from existing shareholders may not proceed if certain conditions are not met, a move that triggered a backlash from two WeWork board members. The tender offer is part of a $9.5 billion bailout package SoftBank announced last year after WeWork -- part of the Vision Fund portfolio -- pulled the plug on its initial public offering.
Chris Lane, an analyst at Sanford C. Bernstein, wrote on Monday that he expects SoftBank shares to rise another 50% over the next 12 months. Even assuming a 50% deduction in Vision Fund investments, SoftBank's stock is "trading between 50% to 61% below its 'long term' potential," he said.
