What changed
SoftBank's quarterly filing shows about ¥969 billion spent on American power and data center assets in the quarter ended June, more than it spent on anything else, which means the buildout is now the company's main bet. About ¥638 billion of that moved this quarter as advance payments, earlier than delivery, which means the cash left before the assets existed.
Those assets sit inside Energy Global, a SoftBank company that builds solar plants and data centers in the United States. To get tenants to sign data center leases, Energy Global handed them warrants, a right to buy into the company later, so the tenant gets a slice of the upside for committing.
The derivative loss on lease-incentive warrants. The gains number went up; this loss is part of why profit went down.
Why it matters
The incentive worked, then it worked too well. As Energy Global's value climbed this year, the warrants climbed with it, and SoftBank booked a ¥453 billion derivative loss against them, larger than most companies' entire quarters, which means success made the promise more expensive to carry.
You can see the bill in the same quarter. Sales rose 10.9 percent from the prior year to ¥2.02 trillion this quarter, which means the operating business grew. Investment gains reached ¥1.86 trillion this quarter, bigger than most full years, which means the headline looked spectacular. Profit attributable to the parent still fell 17.7 percent this quarter to ¥347 billion, down from the prior year, which means the gains line and the profit line moved in opposite directions. Taken together, the quarter suggests the biggest number in a summary is rarely the one that decides the results.
What to watch
SoftBank says the spending covers U.S. power generation and data center assets, and prepaying is how a buyer holds a place in a line. If next quarter converts those advances into working capacity and lease income, the bet would start paying; if it brings more prepayments and more liabilities, the queue is just getting more expensive.
The report names no sites, no job counts and no in-service dates, so a prepayment is only demand until the concrete gets poured. Whether the roughly one trillion yen of warrant liabilities keep growing is not yet known; until SoftBank discloses where the money landed, workers can watch the orders, not the addresses.
Reader comments
Not signed in yet — hit Post and we'll finish it together