SoftBank's profits nosedived 99% last quarter. Here's why its stock went up 12%.
- SoftBank's third-quarter earnings revealed a 99% drop in third-quarter profits.
- However, investors sent the Japanese conglomerate's stock up 12% on Wednesday.
- The rally was due to a judge approving the merger of SoftBank-owned Sprint and T-Mobile.
- Sprint stock skyrocketed 78% on Tuesday, netting SoftBank more than $12 billion.
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SoftBank revealed a 99% drop in third-quarter profits on Wednesday. Investors responded by sending its stock up 12%, adding more than $10 billion to its market capitalization.
The Japanese conglomerate's shareholders haven't lost their minds. SoftBank's Vision Fund certainly stomached a $2 billion loss after writing down its investments in WeWork and Uber, slashing the company's operating income from nearly $4 billion to less than $25 million.
However, investors cared more about a federal judge ruling in favor of Sprint's $26 billion merger with T-Mobile on Tuesday, clearing the way for the deal to close after nearly two years of regulatory challenges. The wireless carrier's stock skyrocketed 78% on the news. As SoftBank owns nearly 85% of Sprint, it netted more than $12 billion on paper.
SoftBank led with the good news in its earnings presentation on Wednesday. The third slide is an image of a roiling ocean with the caption, "Tide is turning." The fifth slide is a chart showing Sprint's stock price going vertical on Tuesday. On the next slide, it downplayed the $2 billion loss at its Vision Fund by pointing out the segment lost $8.8 billion in the second quarter.
