SoftBank’s Son seeks to close valuation gap with share buyback

TOKYO • SoftBank Group Corp is buying back as much as ¥600 billion (RM22.48 billion) of stock, as founder Masayoshi Son steps up efforts to close the disparity between what he thinks the company is worth and its market value.

Proceeds from the ¥2.4 trillion initial public offering (IPO) of its telecommunications business in December will be used to fund the repurchase, the Tokyo-based company said yesterday.

It’s the biggest-ever buyback in SoftBank’s history, and the shares rose in late trading.

Son, who is remaking the company into a technology investor from a telecoms operator, has long-argued its share price doesn’t reflect its business and investments.

He spent much of his presentation explaining that SoftBank’s holdings are worth ¥21 trillion net of debt, while the market value is ¥9 trillion.

The gap is even laid out on its website, which shows the stock trading at a 59% discount to a sum-of-the-parts calculation that includes the telecoms unit, Alibaba Group Holding Ltd, US carrier Sprint Corp and Yahoo Japan Corp.

“What is that gap all about? Isn’t that weird?” Son said at the briefing. “I personally think the share price is too low.”

SoftBank has had success with buybacks in the past. In 2016, Son announced his company would buy as much as ¥500 billion, which sent shares up by the limit the next day. The stock price doubled over the next year.

Of the total raised from the telecom unit’s IPO, ¥700 billion will go toward debt repayment, ¥700 billion for investments and ¥600 billion for the buyback, Son said, without saying what the rest was for.

The listing of the domestic telco operations and the pending sale of Sprint were part of a plan to focus more on the US$100 billion (RM408.76 billion) Vision Fund. The company’s portfolio includes the world’s biggest ride-hailing company Uber Technologies Inc and co-working giant WeWork Cos. Thanks to valuation gains, profits from the Vision Fund and SoftBank’s own Delta Fund more than tripled to ¥176 billion.

“The share repurchase fits perfectly with the goal of boosting the company’s valuation,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “There will be a positive reaction to the amount of the buyback.”

SoftBank Group shares jumped as much as 7.3% in after-hours trading yesterday on SBI Japannext Co’s platform. Volume was low, with just about 17,000 shares trading hands, worth about ¥151 million. The stock closed at ¥8,462 before the results, compared to SoftBank’s calculated shareholder value of ¥20,446.

The Vision Fund sold all of its shares in US graphics chipmaker Nvidia Corp in January, worth ¥398 billion, SoftBank said.

News of the share sale first emerged in December, when people with knowledge of the matter said it was likely. For the three quarters preceding the sale, SoftBank booked a net loss of ¥50 billion on the stake.

The share repurchase period will start today and last through the end of January next year, and the stock will be retired.

SoftBank Group’s operating income rose 60% to ¥438 billion in the last three months of 2018. Revenue rose about 5%. The company didn’t give full-year earnings forecasts.

“The results were very good,” Fujiwara said. “The operating business is doing well, and the Vision Fund adds to that.”

Telecoms unit SoftBank Corp on Tuesday reported a 24% increase in profit during the quarter, despite a mobile service outage that hit millions of customers before its IPO in December. The company kept its outlook for net income to climb 4.8% to ¥420 billion in the fiscal year ending in March.

The company is also readying a new fund focused on Latin America that will be run by COO Marcelo Claure, people familiar with the matter said last week. The fund, still in a nascent state of development, could reach several billion dollars in size and is separate from the Vision Fund, according to one of the people.

Whether SoftBank embarks on another buyback might depend on how long Son, 61, plans to be in the job. Asked about his plans for retirement, Son said he’ll remain CEO until 69, and then stay around as chairman for a while longer. — Bloomberg