SoftBank Group shares fell as much as 4.3%, the biggest intraday drop in more than a month, as profit-taking weighed on the share price of newly listed chip subsidiary Arm (ARM.US). Arm shares fell about 4.5% for two consecutive days after the company surged 25% on its first day of trading on Nasdaq on Thursday. Arm's $5 billion IPO is widely seen as a victory for SoftBank founder Masayoshi Son, who has made a series of ill-timed bets on startups.
SoftBank said the funds will be recorded as capital surplus. As of June this year, the company had about $42 billion in cash reserves.
SoftBank, a long-term investor in artificial intelligence-related technologies, has been accumulating cash to shore up its profits, which have been hurt by billions of dollars in losses from its Vision Fund. Son and his deputies have said they are ready to go on the offensive again.
Bernstein & Co. previously rated the company as "underperform" with a target price of $46, suggesting that the company may not benefit from the AI boom as some investors expected.
Sara Russo, an analyst at the bank, wrote: "Although the expectation that Arm will benefit from the growth of artificial intelligence may bring a premium to the stock price, we believe that it is too early to declare Arm as the winner in the field of artificial intelligence. As the mobile terminal market matures, we believe that expectations for revenue growth are too optimistic."
Bernstein is the third firm to start rating Arm, and so far, the market has evenly distributed ratings on the company. In addition to Bernstein's "underperform" rating, NewStreet Research recommends a "buy" on the stock, while Needham's rating is a "hold." Needham analyst Charles Shi wrote that the company's valuation "looks adequate."