Bloomberg — SoftBank Group Corp. is selling some of its investments in Latin America for the first time, turning a profit on the holdings even though startups in the region have been shut out of the market for initial public offerings.
The Japanese company is among the sellers of Pismo, a Brazilian financial-technology firm that Visa Inc. agreed to acquire for $1 billion in a deal announced in June. With the transaction, expected to be completed by the end of the year, SoftBank more than doubled its initial investment in Pismo in 18 months, according to Alex Szapiro, a managing partner and SoftBank’s head of Brazil. The internal rate of return, a measure of profitability, was 54%, Szapiro said.
SoftBank is selling stakes to “strategic investors” because, with high interest rates, the public markets are more difficult for startups, Szapiro said in an interview. And more divestments are coming, he said. As of June, the fund had $7.6 billion in committed capital in the region, with a fair value of $6 billion.
SoftBank’s pace of investment in Latin America has slowed after the company made a huge splash in 2019, when it began to allocate a $5 billion fund dedicated to startups in the region. About 30 months later, it announced a second fund with $3 billion. Szapiro was a founder of tech companies in the late 1990s. He started local businesses for Apple Inc. and Amazon.com Inc. when they ventured into Brazil, and has been at SoftBank since 2021.
The Japanese company is also selling its stake in Avenue Holding Cayman, a digital brokerage firm that serves middle class Brazilians investing in US securities, to Itau Unibanco Holding SA, the biggest bank in Latin America by market value. Itau is buying Avenue in three tranches, ending in 2026, with a valuation of 1.25 billion reais ($250 million). If the market opens up in the meantime, Avenue can do an IPO, according to the terms of the transaction.
Another divestment is the Mexican payment firm Yaydoo SAPI de CV, which is being acquired by PayStand Inc., a leader in blockchain-based payments between companies that’s also backed by SoftBank. The value of the transaction, announced in August 2022, wasn’t disclosed.
A person familiar with the matter said SoftBank’s investments in Avenue and Yaydoo had similar or bigger returns than in the Pismo case, and asked not to be identified because the information isn’t public.
SoftBank also divested Inco Ltd., known as Isaac, a Brazilian firm that provides financial and software platforms for schools, when Arco Platform Ltd. bought the stake it didn’t already own in a share swap concluded in January. Now, SoftBank holds Arco’s shares and is deciding whether to sell in a transaction expected to happen in the fourth quarter in which Dragoneer Investment Group LLC and General Atlantic LP plan to take the company private. The return wasn’t disclosed.