SoftBank Group Corp
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SoftBank Group Corp
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[Interpreted] Thank you very much for waiting, ladies and gentlemen. Now we would like to start the SoftBank Group Corp. earnings results announcement for the 3-month period ended June 30, 2020.
In consideration of measures to prevent the spread of the new coronavirus, we will conduct our earnings call via Internet. I would like to introduce today's participants. Mr. Masayoshi Son, Chairman and CEO.
[Interpreted] Thank you very much.
[Interpreted] Yoshimitsu Goto, Senior Vice President and CFO. Kazuko Kimiwada, Senior Vice President and Head of Accounting Unit.
Now I would like to invite Mr. Son, Chairman and CEO, to present you the earnings results and business overview. Mr. Son, please.
[Interpreted] My name is Son, thank you very much for your attention today. So worldwide know that there are still issues not solved regarding this COVID-19. And I believe that we just see the signs of the outset of second wave. And I believe that every day is like a war, and we, the entrepreneurs, are also fighting against the various types of challenges.
So when it comes to challenge, as you can see this picture of this presentation for today, about 500 years ago, this type of fighting was happening here and there in Japan, and this is the one shot from there. So back then, the mounted unit of Takeda was the so-called strongest around Japan, and they were making one-shot attack and to be against that. Nobunaga Oda prepared the gun unit. And this gun unit was created with those soldiers.
And even such mounted unit comes to you, and if you miss the shot, then you'll be killed instead. But because you are scared, you never be able to make the right shot. And also it takes quite a long time to load the gun.
And to solve this issue, Nobunaga Oda team actually created the horse fence, which helped preventing the horse attacking you. And by having said -- this fence, you will be helped from this carry feeling that horses are attacking you and still that you'll be able to be prepared well to aim the shot, which means defense.
It's something always necessary to fight, and that's always very important elements for the fighting. In the COVID-19, under such pandemic situation, SoftBank Group has transformed to investment company under the SoftBank 2.0.
But for us, as a defense with lots of defense -- debt, excuse me, I believe cash is actually the defense for us. So by having our cash on hand, we will be able to enhance our defense power. With that. When we have a big chaos with the first wave of COVID-19, actually, our share price went down dramatically. Of course, the credibility, the credit went down.
And back then, at the end of March, JPY 4.5 trillion, in dollars, $41 billion, monetization program was announced. So this is a monetization program, so called. And this -- so sale or monetization of assets held maximum JPY 4.5 trillion will be monetized in one year. And the many people got surprised with this announcement because in a short-term period, can you really make such a big size of money monetized?
In 1 year, JPY 4.5 trillion monetizing. So this program, as of today, actually, the progress so far is that we have already made JPY 4.3 trillion monetized. So for the target of JPY 4.5 trillion, actually, our progress has already achieved 95%. So for the JPY 4.5 trillion in 1 year, actually only in 4.5 months, we have already monetized JPY 4.3 trillion monetization. So I believe that we will be able to exceed our target amount of JPY 4.5 trillion in terms of this monetization program.
So we will make sure to achieve this monetization program.
Looking back, back in 2008, we experienced financial crisis. At that moment, SoftBank was also called that they is facing the bankruptcy risk. So many major media reporters or analysts, investors actually talking very bad about SoftBank back then.
And -- but at the same time, we actually announced two things as a specific measure for the situation. As a financial improvement target, we set the target for free cash flow, generating JPY 1 trillion. The other thing was net debt. But then, we did carry quite a large amount of debt, which was about JPY 1.9 trillion. So this was still we were a very small company, so the JPY 1.9 trillion was already very large debt. About the late -- last 3 years, for them, it was about JPY 100 billion.
And actually, free cash flow-wise, we are trying to generate 3x of that. And when we set such targets, many people actually said that you never be able to achieve such a big target.
And many people are very much skeptical about our target. Net debt also we said to have the net debt, and again, many people was skeptical about this target. So we said that we would like to achieve this 2 target by -- in 3 years. And actually, what happened was for JPY 1.3 trillion free cash flow against JPY 1 trillion target and also for the having our net debt actually reduced by 75%. So those 2 target was achieved.
Actually, we overachieved those 2 targets. That was something that we were able to made happen, which means SoftBank, or I myself, once we make any commit, we definitely achieve those. So we are always very convinced that we will be able to achieve that target and determined to do so as well.
Of course, sometimes that we do need to change the course. But when we change the course, without any excuse that we still like to achieve the target or we announce the other target instead. But in principle, we always try to achieve whatever we said, whatever we committed.
So this time, JPY 4.5 trillion program -- monetization program, once again, that we will make sure to achieve that. And consolidated results that I would like to elaborate a little bit from here. As I mentioned earlier, we are already transformed to investment company.
So for us, as an investment company, net sales, is it really important for us as the KPI. Actually, a question about that. And net income, again, as an investment company, is it really important KPI for us? But still, I believe that those two KPIs. And also this is the rule that we announced these so that we would like to disclose as regulated.
So as of last quarter, same year, that it was JPY 1.4 trillion, and this quarter is around JPY 1.45 trillion. So I believe that this is quite a good progress so far as in the first quarter.
Last year, of course, later on, in the second quarter and on, especially on number of -- fourth quarter we made a big loss. And actually, it was the biggest loss ever since the foundation of the business and many people worried about SoftBank. And once again, many people got worried and considered about SoftBank, especially because of SoftBank Vision Fund, making quite a big loss.
And many people wondered that the Vision Fund may not be able to recover. And then I believe that we will be able to discuss that in later pages.
Net income increased by 12%, up until last year. Net sales and net income was not only KPI. We are also announcing operating income or EBIT. It is about JPY 500 billion or so and a little bit bigger than we expected for the first quarter. And these numbers from accounting point of view, that may not be too much important for business going, but still, I would like to put some color on it.
So net income, last fiscal year, first quarter last fiscal year, we have a onetime gains due to the derivative loss related to prepaid forward contracts using Alibaba share. This is not something that happens every year, but this is the onetime because of prepaid forward contracts.
And based on share price of Alibaba, because share price was increasing about 4 years or so, we've been recording derivative loss. So we -- from the accounting point of view, we've been recording a negative, but that, that comes back as a positive. So this is just a onetime. And those that -- which is not a onetime gain was the green portion, which is the SoftBank segment, which is telecommunication business, our subsidiary, our telecom business and also SoftBank Vision Fund.
And for that this fiscal year, first quarter, Vision Fund and SoftBank segment, as you can see on your right-hand side as colored in green and yellow. So last fiscal year, Vision Fund is doing well, but because in second and third and fourth quarter, they have a difficulty. So there are a lot of lessons learned. But still, for this first quarter fiscal '20 they are showing some recovery.
On top of that, and also Sprint and the T-Mobile were merged as of April this year, as of the 1st of April this year. Officially, the merger of these 2 companies were certified and accepted. And along with the merger, there was a onetime gain, which is opposite here. So these are onetime one-off gain, which will not recur in the coming years.
On top of that, Alibaba's share is rising in value. So related to -- well, the derivative -- the loss on the related to T-Mobile or if Alibaba shares increased, then negative derivative. The number shall be recorded. But the almost the same amount on a cumulative basis.
Well, what is shown on the left-hand side in blue color, well, this amount will be reversed. So this is the accounting of the process that we are going through. So the Alibaba shares, whenever we see the increase in the value of Alibaba shares, our assets increased. So we are happy to see the increase in Alibaba share -- share price.
But in terms of the accounting process, as you see on the right-hand side, well, the onetime derivative loss is to be recorded. So last year, this year, we had several onetime factors, onetime gains, onetime losses and the JPY 100 billion, the increase up to $120 million, but what is more important is the shareholder values.
Today, for those of you who are listening to this presentation, some of you must be investors. And also the other people are analysts related to investment and also people in the media.
The listeners today, in investing your money in the shares, what is important? If you are investing in 10 issues, what is the most important indicator for you? Well, the -- among all the 10 names in your shareholding, well, the total value, is it increasing or decreasing? How much is your principal, the asserting investment amount? And the -- how much the value you gained on top of that. If you borrow money in order to invest in shares, you need to deduct the borrowing from the total value of your holding and how much is the remaining value.
That is the most important indicator to the investors. So to us, the investing companies, shareholder value means that the result of the investment, JPY 5 trillion monetization is what we are conducting and announced. And the asset-backed financing is the core of that. And we do this asset finance in the nonrecourse manner.
So what is nonrecourse? What is the asset financing? I'd like to explain from now on. First of all, first, the big portion, or the part is, as I mentioned earlier, Alibaba-related prepaid forward contracts. Some -- well, a few years from now on, Alibaba shares are to be transferred and the settlement shall be made or the cash is to be repaid to complete the settlement.
It could be shares or cash. We have option to use the cash shares or cash for the settlement, Alibaba shares. Well, this means that we sold Alibaba shares in advance and received cash. But it is not that we sold the shares, but the -- there's a possibility or the option to transfer it in the form of cash. So it is somewhere in between selling or the transaction via shares or cash.
And the second one is a margin loan. SoftBank KK and T-Mobile are related to this. The amount is JPY 0.7 trillion. So they are putting these two together means JPY 2.8 trillion, but the majority is prepaid for the contracts related to Alibaba.
But what is common to these 2 is that the shares as the target of this transaction, or the SoftBank, well, there will be -- this is nonrecourse to a SoftBank group. So no more obligation beyond this amount we received. So when settlement comes in a few years' time, we own shares. And what we have to do is just to transfer the balance equivalent to the transaction from both our net debt and equity value of holding. So there is no obligation beyond this amount of a settlement.
And this kind of a transaction is called nonrecourse. And we have no more obligation beyond this amount. It is nonrecourse to us. So net debt and assets we -- the value of the assets and the equity we hold, so the JPY 2.1 trillion, JPY 0.7 billion, so altogether, JPY 2.8 trillion. We deduct this amount from our assets as well as from our liabilities.
So that is the correct way to handle our net debt or to handle the equity value of holdings. So this graph shows this idea. So as of the end of March this year, JPY 28 trillion is the total amount of the equity. So the -- as the nonstrategic listed shares, we have Alibaba and Sprint.
And also we have strategic listed shares essential to our business. And representative entity here is the telecom company.
And then we have Arm and others like vision fund -- SoftBank Vision Fund. Most of them have -- you already have the public value or the value-based upon the listing. So that leads us to the total amount of JPY 28 trillion, and 6.3% is the debt portion. So we shall deduct to this 6.3% so that we calculate the shareholder value of JPY 21.7 trillion. I repeat this calculation again and again. So I may -- I shall refrain from explaining this once again.
But the equity holding, equity value, less net debt, gives us the shareholder value at the end of March. So this is with conservation of asset-backed financing. So they are financing only based upon the value of the share. And this calculation is with conservation of that financing.
Now as of the 11th of August today, as compared to the end of March, as of today, 28 -- what used to be JPY 28 trillion increased up to JPY 30.2 trillion, and net debt decreased from JPY 6.3 trillion to JPY 5.8 trillion. So deducting this JPY 5.8 trillion gives us JPY 24.4 trillion, so JPY 2.7 trillion increase from the end of March.
As I have been saying, operating income or net income rather than these indicators, well, how much asset value increase to ask the investor, I believe this is a more important indicator to us. So in that sense, JPY 2.7 trillion, that is the increase in the shareholder value, and this is the only and the most important indicator to us.
So these 2 numbers on the bar graph are with consideration of asset-backed financing.
Now without consideration of asset-backed financing, not just the -- as of today, the 11th of August. But the -- if we apply the same idea to the end of March, there was a financing of JPY 1.4 trillion. So the JPY 1.7 trillion shall be deducted. From the equity value of holding and also net debt, and the shareholder value, JPY 21.7 trillion in the previous slide. And once again, we are on this slide. Shareholder value is JPY 21.7 trillion. So this means that the -- with or without the consideration of asset-backed financing does not influence or affect the number or the value of shareholder value.
Now as of today, asset financing is JPY 2.8 trillion. So deducting this amount from equity value as well as net debt, and the shareholder value remains at the same level at JPY 24.4 trillion.
So asset financing. From now on, we are going to deduct this asset-backed financing portion and to make this report simpler. So as of today, net debt is JPY 3 trillion without conservation of asset-backed financing and the JPY 27.5 trillion for the value of the share. JPY 27.5 -- of the JPY 3 trillion for the net debt and the JPY 27.8 trillion. So these are the two numbers I want you to remember.
And the -- in terms of the percentage of these two, so the 24.4%, which is the balance, this is the most important number, which is the shareholder value. JPY 27.5 trillion of assets and how much a net debt do we have?
So what is the percentage of these two, the net debt and equity of shareholding? It is 11%. So let's say you have JPY 10 million of a bank account, that may be your asset that you have. And you may have the 11% borrowing, which is about JPY 1 million. You may have auto loan or some other types of borrowing.
So against JPY 10 million of asset, JPY 1 million of debt or JPY 27 million of assets against debt of JPY 3 million, so that is about 10% borrowing. And I'm sure, well, that level of debt is quite unsettling and makes people a little uncertain and nervous. So usually, at SoftBank Group, 25% is the level that we would always like to achieve as -- to maintain as the upper limit during the normal period. And even during the so-called abnormal periods, when the stock market experience the sudden drop and the share prices drop quite sharply, even such in abnormal times, we shall maintain the upper threshold of 35% for LTV.
So this is a policy for the sound management. And even under the influence of COVID-19, we will never make excuses. We want to make our financing healthy so that we will never make the excuse saying that we may exceed 35%. So we will always maintain this upper limit and the threshold. And against JPY 4.5 trillion, we already made a progress of JPY 4.3 trillion of monetization.
So under the abnormal times, the emergency environment, we try to remain defensive, meaning that we would like to build up the cash. And we well, our intention is to always take those, the cautious and the defensive actions to build up cash. We don't know whether the second wave or third wave of COVID-19 may hit us in the future, but we can overcome this.
Sometime in the future, we may be able to come up the vaccination and the antibodies. And so until all these vaccination will be available to other people, we should remain careful and cautious and always try to manage our finance so that we can maintain this low level of LTV.
So the -- we at SoftBank, we are SoftBank Group on a defensive posture. At the time of the, well, the normal times, we -- sometimes we are adventurous and are taking risks but even at the time of global financial crisis, Lehman crisis and the COVID-19, when the situation is quite unstable, we always try to the term cautious and conservative. And that is the attitude we would like to take once again this time.
So JPY 4.5 trillion of monetization, if that is what we are to do, first of all, the JPY 27 trillion or the JPY 30 trillion, that is the value of shareholding we have and we are talking about. But these are the paper gain, in other words, the numbers on the paper. And sometimes -- some people criticize that if we try to sell, then the values will crush so the -- some people may say that these values are just a fictitious, just the numbers written on the paper. Then what do they think about the paper money and currency? Well, they always have the same value as the values that will take different shapes. But if we try to sell our shareholding, then often, people criticize that the value will crush and the value that we have is the paper value. Is that truly so?
[Interpreted] So when you see the performance, Alibaba, so we mentioned the monetization of Alibaba share and starting from April, we've been executing that.
And for the monetization, Alibaba's share, did it really drop? And as you can see from this graph on your left, even after the monetization program, did you see any drop of shares? Actually, it's not T-Mobile share. We announced the sales of shares. Did it really drop? It's not really happening. SoftBank Corp., telecom business, we announced to sell a portion of shares, actually, stays very steady and stable.
So under the COVID-19 situation, asset value of Alibaba Group is actually increasing. So even we monetize those assets, it -- so that even we sell or monetize, and we have already executed up JPY 4.3 trillion. But still, it's not really decreasing our asset value, but showing the increase in asset value.
One another announcement that we made at the time of JPY 4.5 trillion program, and the purpose of use for that monetization, we have two objects. One is the share buyback. The other was the improvement of financials. So share repurchased JPY 2.5 trillion. We have announced and we spend about 4 months. So far, we have already executed JPY 1 trillion so far. So this is already been completed.
Remaining JPY 1.5 trillion, this to be executed going forward. But I don't want to be called as liar later on. So I would like to make sure here that at the time of shareholders' meeting, but let me repeat once again that remaining JPY 1.5 trillion, we will definitely do that. So in total, JPY 2.5 trillion share repurchase, we will definitely do that. Whenever we make any commitment, we will achieve it, as I mentioned in the beginning of this presentation.
However, when it comes to the timing for completion of this program, we -- do we really complete really by the end of April next year? It may end in March, it may be June. It may be September. So we don't want to set the final date to complete this target, but rather, sometime in near future that we would like to complete. So when it comes to the timing for completion, we would like to be a little bit flexible here, which is actually good for both SoftBank and shareholders for our defense.
Of course, next month, for example, if we have a big explosion of second wave of COVID-19, then we may need to rush and accelerate the program of share buyback. Or if we see the calm down of situation in equity market and not being unstable anymore, then we may want to be flexible keeping some cash on hand a little bit and a little while. So depending on the situation that we want to be a little bit flexibility here. But of course, JPY 2.5 trillion is some -- is something that we will definitely achieve sometime around next year, not too far away from what we have said before.
Since we transformed to investment company, many people are questioning about our shareholders' value and with the comments or feedback that we've been trying to be open about some of the parts value in corporate website, and actually, we are doing it daily basis.
However, although Vision Fund 1's investments have progressed and a number of private companies are increasing, the gain and loss of private companies are reevaluated at every quarter. And as a result, it may mislead the investors. So we would like to disclose an update of timing of quarterly earnings announcement for this shareholder value going forward.
So instead of daily disclosure like last time when we had talked about WeWork or Wag, those portfolio companies that -- sometimes show a big loss in asset value in quarterly basis. So we don't, as a result, want to mislead the investors by providing such disclosure of daily basis, and we've been pointed out by the experts.
So that this time, we have decided to disclose on quarterly basis after the auditors audit and make sure that we have more accurate numbers. So we will stop disclosing in daily basis. So this is the changes that we are making.
So the -- I also would like to share about the status of assets. And I like to pick up the highlights. The biggest one is Alibaba.
As I mentioned earlier, asset we hold is the payback gain. And many people say that this is only on book. However, when you look at the performance of Alibaba, it is making steady exponential increase. And even with the size of the business, they are making 35% increase in total revenue.
Net income with this size of business, they've been making a 42% increase and making a very steady exponential increase, so $2.19 billion. And you see that the share price of Alibaba is not the bubble at all from my perspective. So they are making very steady steps in net income, free cash flow and the value has been created based on those results.
Second highlight is SoftBank Corp., our domestic telecom business. And they are separately listed. And under the COVID-19 situation, many companies are facing this decrease in sales and revenue. Our domestic telecom is actually increasing or maintaining its steady growth in revenue. Operating income is actually recording its highest operating income ever.
So without any excuse that amid this COVID-19 situation, CEO, Mr. Masayoshi, has also announced to make sure that they can increase in revenue and sales.
Third highlights is Arm. With $32 billion, we acquired this company about 4 years ago. As of today, we -- Softbank Group owns 75% and 25% is held by SoftBank Vision Fund.
Our -- based on the investors, LPs request that the 25% are held by Vision Fund. In total of those 2, we have 100% in Arm. Recently, the media is covering some articles that back in -- that 2023, that we are planning to relisting. So it was originally a listed company and relisting is not that difficult actually.
However, of course, you need to make a good performance and also collecting the initial cost. And that listing is something that we have scheduled to relisting so that some interest over this company -- as one of the options that we may study or explore the option of selling a part or some or full of the company.
Of course, another option is to bring forward the timing of IPO of this company. So that is another option that we can have. So we would like to closely study the best option. Of course, it's all up to the counterpart as well so that we would like to explore the opportunities or options that we should be choosing as the best option.
Along with that, IoT service business -- Service Group has been spun off, and the original plan of Arm is to focus on the original business of Arm. So that's we -- Arm has been building as it's planned. So Alibaba, SoftBank Corp., and those are the 3 main highlights.
And the fourth one is Sprint. At the time of our condition of company, we bought with JPY 2.5 trillion. But as our strategy, the #3 player, #4 players in the market, even we buy this company far behind those big 2 players, and that's only so far.
So if we're to enter into U.S. market, we wanted to merge those 2 companies between Sprint and T-Mobile and we to become the shareholder. That was a big picture, big strategy to enter into U.S. market. That was our original plan in policy. However, after the acquisition of this company with JPY 2.5 trillion, but then we didn't have that much money, but -- so that the majority of that is coming from the debt. So we use our cash position of JPY 0.4 trillion for this acquisition.
And that time, our cash that they used on book is JPY 0.4 trillion. So right after the announcement of this merger -- acquisition of share price of SoftBank Group has dropped dramatically because we -- mainly, the acquisition was done through the debt.
But at the same time, after the acquisition, we had a very challenging moment to turn around the business of Sprint, so because of the big negative numbers and also big debt in Sprint, so not only our debt for the acquisition of Sprint, but also Sprint itself also had a lot of debt on their book. So actually, it was a double count of the debt. So that's concerned -- I understand that many people are concerned about the situation.
But as you already know, this April, we happily able to receive the approval by the regulatories, and the value has increased so that share value of the new core by recalculating our JPY 0.4 trillion has increased to JPY 1.9 trillion, and total value has increased to JPY 3.6 trillion.
So the equity value, 0.4, became 1.9. So it's about 5x. Many -- even you look at the many investment companies around the world, in IRR, it's about 25% compound increase every year. As in record-wise, I believe, not bad at all.
So for many investors' point of view, 25% IRR, wind compound is quite a good performance as a matter of fact. And I believe this was as a result, one, of the good investments of ours as well. We have made initial investments in the business. Whatever it will be, I believe investment in Arm has been a great one. And that's something that we would like to make it happen.
And the next is Vision Fund. So we invested in 86 companies. And among 86, there are successful companies, and the others were not. 29 companies turned out to be successful.
Well, the JPY 1.1 trillion in terms of the valuation gain and JPY 0.7 trillion in terms of the realized gain, when it comes to valuation, it is not up to us to evaluate. We are the -- we have LPs and the -- who are investors. And from these investors, or the GP -- well, the SoftBank Visual Fund. What is the performance of this fund?
Well, they scrutinize in the study the performance of the fund. So we are subject to their review and also the third-party evaluation institution also gives us the valuation. And that their valuation gain is calculated at JPY 1.1 trillion, 29 companies, and realized gain of JPY 4.73 trillion.
Now when it comes to the valuation loss, JPY 1.5 trillion, and 48 companies generated -- incurred these losses. So the total is here. And the difference between these two is JPY 0.2 trillion, which is the investment profit.
And I'd like to give you more detailed explanation. So out of 86 companies that we invested in, 8 companies are listed now. They used to be unlisted when we invested initially, but in the coming -- in the past few years, they got listed, 8 companies altogether. And $9.5 billion, that was the listed company total value.
It was $9.5 billion and it increased to $12.7.
Some of them turned to negative, not increase. But we are looking at the whole total value of the listed companies. The original investment amount was $9.5 billion, $9.5 billion. And the $3.1 billion is the increase, so 1.3x increase. So that is the performance as of the end of June.
Now looking at the 10th of August performance, how about the performance? So between the end of June through the 10th of August, actually another company got listed. Relay Therapeutics, in the light blue color indicated here, got listed in July. So if we add this company and their value, $1.1 billion. So that is the increment -- increase in the value -- additional value. That's the market value, $1.1 billion.
So all in all, I mentioned that the increase was $3 billion, but the increase -- increment -- well, the increase $4.6 billion. And the earlier I mentioned that the increase was 1.3x. But as of today, the increase is 1.5x. So this is the performance of SoftBank Vision Fund.
Now in terms of the backdrop, the JPY 8.9 trillion is at the end of June, the incremental -- the investment amount. And many of them are unlisted, but the JPY 1 trillion portion, this is the listed company part.
And also cumulative the gross gain of listed company is JPY 0.3 trillion. And the cumulative gross loss of private companies is minus JPY 0.1 trillion. So the JPY 0.2 trillion, because JPY 0.3 trillion less JPY 0.1 trillion is JPY 0.2 trillion. So this is the valuation gain of Vision Fund. And as of the 10th of August, so JPY 0.3 trillion and JPY 0.1 trillion, these are the gain and the loss in June. And now it has increased to these numbers, JPY 0.5 trillion, as of the 10th of August. That is the gross gain and the gross loss is minus JPY 0.1 trillion.
So as for the SoftBank Vision Fund, performance is improving. So the -- I hope you understand this. Many people say the Vision Fund is in the total loss, the value has been reduced to 1/2. That is what many people used to say.
But in reality, JPY 0.5 trillion less JPY 0.1 trillion meaning that 0.1 -- JPY .4 trillion, that is the increase in the value of the holdings of Vision Fund.
And on the 16th of July, this company got listed, Relay Therapeutics. For the year, we have 32% of this company. We are the largest holder of this company. So their aim is to transform drug discovery process through protein motion and AI and the 2 anticancer drugs for human usage. Well, the clinical study has already been started.
This company is not yet generating profit, but with these 2 cancer drugs, they already entered into the clinical study phase. For the 2 cancer drugs, and the 1.5 years ago, we invested JPY 32 billion, and it has grown up to JPY 123 billion, 3.8x in value.
So up until a few time ago. Well, the many people didn't know about Relay Therapeutics. Did Softbank owns a company like this? So that was the level of understanding about this company, Relay Therapeutics. But now the investment amount increased from JPY 32 billion to JPY 123 billion, our value in this company increased by 3.8x. So this is the most recent, the company that got listed among all the portfolio companies of SoftBank Vision Fund.
So including all these companies in the past 2 years and 1 quarter, so 9 quarters for the year, I would like to show you the performance of Vision Fund. So starting from the first quarter 2018 through first quarter 2019, they remained positive, but last year, it deposited losses.
But as of today, it has returned and turnaround JPY 296.6 billion of valuation gain was generated. There is a new listed company added to the list. So of course, this is not perfect because the second wave of COVID-19 pandemic is not over yet.
So it is not that we can guarantee that this kind of performance of a Vision Fund will remain in positive, the profitability. I cannot say so, but it is getting better and recovering. And the 5 to 6 companies on the portfolio, they already started making preparation for the upcoming listing. So this means that the performance of SoftBank Vision Fund is improving.
And there are other topics that I'd like to talk about, which is outside of SoftBank Vision Fund. This is not the Vision fund, but this is what -- while the SoftBank Group invested in about JPY 38 billion, it has gone up to about JPY 90 billion. This is the company called Lemonade. The multiple is 2.7x.
So as of today, 10th of August, this is the number -- most recent number. And the -- recently, the 2nd of July. The Relay Therapeutics that I mentioned earlier and the Lemonade, this company, both of them or the -- went ahead with IPO in July, quite recently. And the performance of this company and also the value of this company increased by 2.7x.
So this is the performance about our investment. And this is another announcement I'd like to make. This is about the establishment of investment management subsidiary. I have been talking about the monetization of JPY 4.5 trillion. Or even more than JPY 4.5 trillion, we have visibility that we will be able to achieve that level of monetization.
Now how about our borrowing, particularly corporate debt, corporate bond? We already issued corporate bonds, and all of a sudden, the redemption will not come immediately. So the -- in next year, the year after that, in 5 years, 6 years, these corporate bonds will be redeemed in the future.
In the meantime, we will have excess cash to SoftBank Group, but we are going to see the excess cash. We borrow money and we deposit money, and do both. There will be a time from now on when we have both of these areas of liquidity.
So Mr. Goto, please give us additional comments, if it is adequate. But so how much is the level of the bond -- the debentures?
[Interpreted] Well, JPY 160 billion will be that -- well, against the JPY 200 billion for the domestic bonds. And JPY 400 billion to JPY 500 billion, that is the magnitude of the redemption or the size of the issued corporate bonds.
And the prepayment or the -- we go to the market to purchase these bonds from the market. But if we try to do so, all the investors want to keep their bond holding. So we are trying to buy as much as possible from the market in order to reduce the net debt. If the redemption doesn't come immediately, then there will be remaining corporate bonds. But at the same time, we have cash kept at bank.
And at the same time, I talked about the 11% LTV and for other cash and liquidity. Vision Fund, we will go ahead with the investment in the SoftBank Vision Fund. And there are other listed companies with highly liquid -- the publicly listed stocks. So we hope to start the management of these -- the resources. Liquidity as a testing purpose, 30 issues, particularly IT-related companies with a high level of liquidity, Amazon, Apple, Facebook, so these are the names generally recognized widely by many people. These are highly liquid, names that we can sell quite easily in the market. So we are purchasing these issues.
So we purchased directly from the market, which is direct investment. And in addition to that, in order to minimize the risk, we use derivative transactions as well. And against the volatility in the market, we hope to hedge the risk.
So to give you some idea or the image, if you remember, 2 to 3 years ago, NVIDIA, so we had JPY 100 billion worth of the equivalent of NVIDIA shares back then. And then share price increased significantly. And we enjoyed the unrealized gain. And when we had the unrealized gain, well, we [ bow ] to put as a derivative from the market.
So at that certain price, well, we purchased the right to -- well, the sale at the certain price. And so both the put and so the call, so that -- to fix the unrealized gains and by setting the call, we enhanced the efficiency of the capital. And in the end, we actually enjoyed the realized gain of hundreds of billions of yen.
So at that time, there was a commotion or the story about the Bitcoin and NVIDIA shares surged and then dipped. Now it became more stable. And now SoftBank, made the so much unrealized gain of NVIDIA, but yes, it dipped once again. It was just a pie in the sky. Many people said so.
However, actually, they both -- they put both the security to minimize the decrease in the value. So yes, some people said that, that was the wise move to use a derivative in order to fix the value that we can enjoy. So that is the image of the derivative that we would like to continue to implement.
In addition to direct investment, we would like to use the derivatives in order to fix the value, which is still unrealized. And by using derivative products, without spending much amount of money, we will be able to minimize the risk and proceed with the investment.
So that is the type of activities we would like to promote. As for this company, the investment management subsidiary, the purpose is to manage the excess cash and the diversification of assets.
Earlier, I talked about the Alibaba, SoftBank KK and T-Mobile. We have shares in these companies. But now we have become the investing company, and these are just the 3 names. And it is not been diversified yet sufficiently, having only 3 main investment companies on portfolio. And that is a comment we often receive from the analysts or the investors.
So we need to diversify more with good balance. So as we announced, well, we will conduct a setback financing in order to monetize some of the assets. Future growth over the year, it is not that we do not trust the future growth of these companies.
Most recently, for example, Alibaba Call. We bought Alibaba Call recently. So including these activities, we will go ahead with the monetization, but we buy call option as well. So that we remain confident for the future growth. But the diversification of assets and the managing excess cash. So these are the purposes of this new subsidiary.
And the capital investment, the USD 555 million, shareholding, SoftBank Group has the 2/3. And I, myself, have the 1/3 of this investment managing -- management company. Or usually, the asset manager receives the contingent fee, but well, I am not doing this as the corporate manager but as an investor. We would like to receive the incentive without taking the risk on the -- I want -- well, I don't think it is a good idea to just want the contingency fee without taking risk. So the -- out of the capital investment or the -- i.e., take 1/3 of the shareholding and take risk by myself and establish this investment management subsidiary.
So the -- if I -- well, this company becomes successful, then the -- I will be able to get via the gain out of the successful results of this investment management company, 1/3 of that. And I continue managing the SoftBank Group. So well, the -- of course, I have to be mindful about the conflict of interest.
So at the Board meeting and also i.e. disclose everything to the Board as there was still the Audit Committee and without spending 1/3 in the -- or is it better to ask the asset manager to handle everything on my behalf or is it better that I will be more engaged in the actual investment management for 1/3 of this company?
So together, with the outside directors, we had the discussion, which is better. And actually, the shareholders and benefit of the shareholders of SoftBank, well, this format is the most suitable and beneficial to the investors and the shareholders of the bank. So the highly liquid shares like cash, so that is the main focus of this investment company. About 30 companies altogether for testing experimental purposes, we already started investing in the 30 names.
So this is the outline of this announcement. So now I'd like to give you the conclusion first. So we need to be -- have a good defense, and that means they do have sufficient cash. So the -- out of JPY 4.5 trillion, we already achieved monetization of JPY 4.3 trillion.
In 3 months' time. In our shareholder -- or the equity value of the JPY 24.4 trillion is the current shareholder value. And the SoftBank market cap is JPY 13 trillion or so. So in that sense, well to this shareholder value. Well, there is a discount on this shareholder value.
Share price. Well, since the dot-com bubble of year 2000 for the -- since then, well, the share price has come up to the high level, but still, it is discounted.
And the net debt has been decreased to JPY 3 trillion. So far, well, the people had concerns about SoftBank. First concern is that we have excessive debt deficit is big in the SoftBank Vision fund and also a decline in the equity value of holdings.
These are the 3 main concerns people have about SoftBank. But in reality is like this. So we have been able to reduce our net debt by JPY 1.6 trillion. It has come down to just JPY 3 trillion, 11% of the assets.
And the finance became more healthier and sound. And the SoftBank Vision Fund turned around, now it became profitable.
And as of the end of March, it was totally red in a deficit. But the turnaround has already started. And the third point is the shareholder value, which is the most important indicator to show the value for the shareholders.
And the JPY 2.7 trillion increase from the end of March in just 4 months' time period. JPY 2 -- JPY 7 trillion increase for -- in the value for the shareholders. Looking at this from a much longer perspective, it looks like this since the listing of the company. Constantly, our shareholder value has been on the increase constantly.
And exponentially, the value -- shareholder value increased like this. So to maximize the shareholder value, that is the main focus of us, and we became the investment company, SoftBank Group Corporation, and we'd like to strengthen our capability to defend ourselves.
Well, it is not for the purpose of the plain money game. Our aim is to make the people happy through information revolution, information revolution, happiness for everyone.
So we acquired companies and grew them and also as the -- through Vision Fund. We became the owners and holders of many companies and businesses, and also on the testing the experimental basis, we started the investment management company.
So the information revolution, that is what we would like to initiate. There are leaders and entrepreneurs who are causing and creating the information revolution. And we are -- we are putting them together in the group and lead their information revolution. So that with a combined force, just like the conductor of an orchestra, we are promoting information revolution.
So this is our corporate philosophy. We have never changed our corporate philosophy. We never changed this since the inception of our company. This is the purpose of this company.
And with this in mind, I founded this company. And without changing this basic philosophy, I would like to promote the business and operation of this company.
And this concludes my presentation. Thank you very much for your attention. And now we'd like to welcome your questions.
[Interpreted] [Operator Instruction] So first, Mr. Sam from Reuters.
Sam from Reuters. I would like to ask about decision to drop operating profit from the earnings. I understand your explanation that you prefer the value of the assets shareholder value. But do you think this runs the risk of increasing the image of SoftBank as being opaque and difficult to value, that there's less transparency around the numbers?
[Interpreted] Yes. Thank you very much for your questions. Several times in the past, for example, if Alibaba share value increase, Uber share value decrease. Both of them are listed company. Both of them were just minority shareholders.
However, if Uber share price increase and operating income increase and Alibaba share price increase, but the operating income does not increase, so this is unnatural. We are not operating, but why we need to show the operating income? We are the investment company. We are not doing the operation. We're just making investments sales, operating income. Those measure is not really fit to measure our company.
So starting from this fiscal year, we dropped, of course, pretax income, those from the disclosure regulation point of view that we will disclose, but basically net sales and net income.
And the operating income doesn't really make sense at all as an investment company from my understanding. Net income, so it's a block of onetime gain and onetime loss. And even that we see the increase in Uber share price or Alibaba share price, but we would like to focus on the shareholders' value -- less asset value. That's the only clear indicator to measure our company and business. So that's the only one measure that we will be using going forward.
Of course, from the regulations point of view that we need to disclose that the net sales and the net income will be continuously disclosed.
[Interpreted] Now we would like to take a question from Mr. Owada from Nikkei BP.
[Interpreted] I'd like to ask you about the business model of Arm. This may be a fundamental question, but the shipment of chip is increasing continuously -- exponentially from Arm. That's what you have shown. But the sales is not increasing exponentially. Why is it? And what makes the net sales grow exponentially as well?
If so, when can we expect the exponential growth in net sales? So I'd like to invite your view about the future of Arm.
[Interpreted] So net sales in the income, what contributes to their performance? It's the shipment of chip for smartphone applications. So both in terms of sales and the profit, well, the chip for smartphone is the most important driver. In the past 1 to 2 years, 4G to 5G, there will be a replacement from a 4G to a 5G. Now is the time of the transition of the technology.
And also now, most of the people have smartphones. So the shipment of the chips to be used for smartphone application has been decreasing. And that is the reason why the net sales or the sales performance was not exponential. But the volume -- the shipment of chips increased for IoT application or for other applications. The chips for these purposes, applications increased in volume or in number.
But most recently, 5G smart ones are being launched to the market and being sold more. And the unit price of the upper chip is larger for 5G, and the profit contribution is also larger for Arm. And the 2023 -- starting from 2023, Version 9 Arm chip. So that is the new generation of Arm chips to be introduced and to be sold to the market.
So already many companies have already signed the licensing and started designing their products for that generation. So once the production starts, well, we expect the full-fledged production of that generation to start in the year 2022 and then 2023 exponentially.
Version 9 chips will be shipped and -- well, the starter version, security function, AI function will be augmented, enhanced, so computing power will be higher as well. So this is the version that will be more profitable. So originally, for the timing for relisting was set at 2023. And the -- this is a factor that justifies that timing.
And another growth driver is cloud-related business. Amazon AWS is the largest player. And Amazon AWS, their cloud service, they started the design. Well, the -- recently, in order to, well, use the Arm chips, and the other companies are also following suit, it is more -- they are better in terms of the power consumption and the efficiency.
So the cloud chips will replace other chips. In the autonomous driving, the -- will be introduced. The cars will be driven autonomously. So for these new technologies, when we acquired this company, well, the -- those -- the chips didn't have much market share, but now it has grown to almost 8% of the market today.
Market share is expected to expand and grow in the future. So that's another growth driver. So the value is expected to grow further for Arm. So both in terms of the defense and offense, or the -- we have the different alternatives and options about the Arm.
[Interpreted] So you turned 63 today. Today is your birthday. And some people asked the health condition, and yes, you mentioned that you may stay at the helm of this company on the -- even beyond the 70 years of age. So this -- does this mean that you will change your previous year, the comment that you will retire at the age of 50?
[Interpreted] Well, the let's see. Well, the -- I wasn't sure about the health. Well, the in the -- I may retire, well, when the health condition is not good. Well, my life is only for 50 years. That is what I expected at the age of 19. That is the business life. The -- back in when I was 19 years of age. But now the medicine is getting better and the people are living longer today. And the -- I play golf, sometimes.
And the last year, in the summertime, well, I play down the park, about 3 times last year, and I was convinced that I always be fit enough and healthy enough. So the -- well, I wanted to mention now that the -- I would like to remain in the business even beyond the 50 years of age, and that is what I wanted to say.
[Interpreted] Mr. Igawa from Nikkei Newspaper.
[Interpreted] Yes. My name is Igawa from Nikkei Newspaper. So strategic position of BAM that I would like to ask you. Earlier, you mentioned that you may consider the option can be selling or hold ownership. But in your AI strategy, I believe this is one of the important company. May keep holding this share, it's not the most option for you anymore? Other than NVIDIA, do you have any candidate or counterparts for negotiation for this?
[Interpreted] For the name of the company for the negotiation, I have no comments to that. So I don't refer to any company name, but I will say we are having a negotiation, and within this negotiation, there are several range for that. But the basic idea is not a selling whole in cash but consideration can be many ways or many combinations. So it's not as simple as sales or anything, but we would like to continuously pursue the vision as one of our option too.
[Interpreted] So long hold is not the option anymore for you?
[Interpreted] Going public is one of the option. Partial sales is one of the option. Selling in whole or whatever it is, that's one of the options as well. And the consideration option is the combination of cash and share. But when it comes to the counterpart amount, any terms at this moment -- I have no comment to that at this moment.
[Interpreted] Next, Mr. Hyuga from Bloomberg.
[Interpreted] This is Hyuga from Bloomberg. JPY 1.3 trillion of net income, net profit. So is this sustainable? How sustainable would it be? That's my question. Well, according to your presentation, the almost the -- all of them consists of a onetime factor like the asset sale as well as the -- the deduction of the tax. And the Vision Fund 2 is not very active and there may be a limit to the listing of the portfolio companies of Vision Fund 1. So that I believe that you will need another the growth opportunity. Now U.S. -- I'm going to say U.S.-China tension, Alibaba's shares, some people say -- voice their concern over the future of Alibaba shares.
So Mr. Son, the how -- what is your view regarding the sustainability of your profit? Please explain.
[Interpreted] Yes. Vision Fund 2, we use our own fund to certainly -- we are actually continuing investment in the Vision Fund 2. We already invested in 10 companies altogether. And in the pipeline, there are several companies already in the pipeline. Interesting companies are emerging, and they are in the pipeline.
Well, back in the dot-com bubble, well, they crushed in the year 2000. And the people across the world were very critical. Investing in the Internet or the IT or -- was supposed to be a very bad idea. However, we defended our position, and we invested a limited amount of our money in some of these IT companies. And one of them was Alibaba and some others.
So once again, the unicorn bubble, well, the people -- well, some investors, the end media, fed up with the idea of investing in unicorn. And it may be because of this coincidence with the COVID-19 pandemic.
But with AI, digital transformation is possible. Well, industries, the traditional industries can introduce more digitalization by using AI. Our thanks to are due to the pandemic of COVID-19. Well, that trend may accelerate even further. So my belief and my idea will remain solid and unchanged. So by using SoftBank's money, we are continuing investment in the SoftBank Vision Fund 2.
But as I mentioned at the beginning, first of all, we have to defend our position. We need to be on a defensive. And then at the same time, prepare for the next round of growth. So the area I showed you, the pictures of the old warriors, the wristy guns, they protected by the shield, but they collected as many firearms as possible to defend and also to take on the offensive move. So it may not be a big amount of money, but we would like to add very good companies on to our portfolio. So did I answer your question?
[Interpreted] Next, please. Due to the time constraint, we would like to end this session after taking this question. [ Mr. Hota ] from Nikkei Newspaper.
[Interpreted] Yes. This is [ Hota ] from Nikkei Newspaper. Can you hear me okay? I have one question. Earlier, you mentioned about the investment management company you mentioned. So under such circumstance, can you try to expand the target of the investment?
And depending on the economic situation, because you focus on the unicorn investment from for your investment policy, but is this to actually revise your investment policy, not only investing in the unicorn, and that's going to be difficult to find a good opportunity because of this circumstance, or is there anything else?
[Interpreted] Basic policy doesn't change. Vision Fund, will we keep looking for Unicorn hunting and Vision Fund 2 and 3 that will be -- stays the same. But this time, this investment management subsidiary, because it has close to high liquidity investments. And also we have sold some that those we have purchased at the end of June so that we can frequently have a transaction in quite the short term.
So it's quite similar to the bank deposit, but that's quite flexible in terms of liquidating, and that has been verified as well. So considering all that, I believe the management of our money and also mid to long-term information revolution AI-centered companies and listed securities are some -- also important in terms of such information revolutions, and we would like to expand our target from that sense. But at the same time, the company or business should be focused on the information revolution.
So that's always our domain strategy. And also we are the most familiar with such area, and we have a corporate philosophy in there. That's why that we would like to focus on such philosophy.
[Interpreted] So this is COVID-19, this is not a onetime kind of measurement, but are you going to manage this company for mid- to long term?
[Interpreted] Yes, that's correct. Thank you.
[Interpreted] Thank you very much. This concludes the SoftBank Group Corp. earnings results announcement for the 3-month period ended June 30, 2020.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]