![]() The deal was Softbank’s biggest investment in a Southeast Asian firm. Last December, Softbank invested S$250 million in the taxi service aggregator app, GrabTaxi. “Investors must not be afraid to pay high prices for category winners with high growth rates” Based on last November’s performance, Softbank reaped a return of 4,350 times on the initial US$20 million investment it made in Alibaba in 2000. ![]() Look at Softbank’s investment in Chinese e-commerce giant Alibaba Group Holdings and you know that its strategy has paid off handsomely. SoftBank Corp., a Japanese telecommunications and Internet corporation, advocates this mentality and actively invests in many top winners of each category across the globe. It maintains that to play the game, investors must not be afraid to pay high prices for category winners with high growth rates. This brings us to the new school of thought. ![]() In this situation, many small players are strangled and their big corporate investors are left with losses.ĭiagram 2: Mega names Google, FaceBook and Twitter squeezing small players in net mobile internet ad revenue to gain market share According to eMarketer 2012-2014 data, only Facebook has really been successful in gaining mobile ad-revenue market share. Although promising, the start-up cannot dent the dominance of Facebook and Google in the mobile advertising space. A big telecommunications company buys a small mobile advertising start-up with hopes that this acquisition will boost its digital business. Here is a scenario based on some real examples. However, dividend commitments restrict corporates and leave them with limited flexibility to buy potential acquisitions that can complement and grow the business well. There is nothing wrong with this strategy, especially since the duty of most listed firms is to ensure that investments and acquisitions are accretive for shareholders and dividend payouts are maintained. The traditional corporate mindset regards value-for-money investments as wiser and making more financial sense than paying top valuation for a market leader. Vicious Cycle of Investing in Value-for-Money Players
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