SoftBank unveils dramatic RM182b asset sale plan on coronavirus

CEO is trying to salvage his reputation as one of the world’s foremost tech investors

By BLOOMBERG

TOKYO • Masayoshi Son is making his biggest play yet to silence doubters. Yesterday, the Japanese billionaire unveiled an unprecedented US$41 billion (RM182.04 billion) plan to sell off assets and shore up SoftBank Group Corp’s crumbling market value in the face of the coronavirus pandemic.

The scale of the endeavour surprised investors, sending the Japanese firm’s stock up 19%. Yet, that’s a fraction of the capitalisation the investment house has lost since its 2020 peak, underscoring persistent concerns that tumbling technology sector valuations will damage Son’s debt-laden company.

The coronavirus-triggered rout has also spread to credit markets and sparked a surge in the cost of insuring debt against default — including that of SoftBank, whose credit-default swaps touched their highest level in about a decade.

Yesterday’s announcement appeared intended to underscore a point Son himself has made repeatedly: That SoftBank is worth far more than its current stock price thanks to holdings in industry leaders from e-commerce giant Alibaba Group Holding Ltd to British chip designer Arm Holdings plc and Japanese carrier arm SoftBank Corp. Its slice of Alibaba alone is worth more than US$120 billion.

It’s unclear what SoftBank intends to sell, however. Alibaba represents its single biggest chunk of unrealised value, but Arm — which SoftBank bought for US$32 billion in 2016 — is a worldwide leader in the chip architecture that underpins modern smartphones. SoftBank Corp, on the other hand, is a steady if unspectacular leader that generates cash to help fund Son’s global ambitions, and the group likes to use its stock as collateral for loans.

Part of the sale proceeds would go toward a new share buyback programme of as much as ¥2 trillion (RM80.4 billion) that comes on top of previously announced repurchases. SoftBank spokeswoman Hiroe Kotera declined to comment on whether it would sell shares in the Chinese e-commerce giant.

Son is trying to salvage his reputation as one of the world’s foremost tech investors, a name based largely on a prescient early bet on Alibaba, which grew to dominate e-commerce in the world’s No 2 economy.

Even before the global outbreak, WeWork’s spectacular implosion served as a catalyst for Son to temper SoftBank’s and the Vision Fund’s aggressive global bets. He urged founders to rein in excesses and focus on the bottom line, wary of a repeat of WeWork’s uninhibited expansion.

Son has reason to worry. SoftBank’s exposure to cash-burning start-ups partly prompted S&P Global Ratings to cut its outlook on SoftBank to negative, citing also the broader market declines and the conglomerate’s initial plans for a buyback. The stock repurchase programme announced yesterday comes on top of a ¥500 billion plan announced just over a week ago, after activist shareholder Elliott Management Corp called on the Japanese investment firm to boost returns.

SoftBank has said its financial policy is to have enough liquidity on hand to cover two years of bond repayments and focus on its loan- to-value ratio, a metric for balancing net interest-bearing debt against the value of investments. SoftBank has also said it’s curbing new investments to match the current environment and acknowledged that fundraising costs are likely to rise.

It keeps a running tally of what it calculates is the value of its shares, excluding its debt. Despite yesterday’ rally, that figure remains more than three times its closing price of ¥3,187. — Bloomberg