SoftBank unveils US$4.8 billion buyback after stock tumble, Elliott backs move

SoftBank unveils US$4.8 billion buyback after stock tumble, Elliott backs move

FILE PHOTO: People walk behind the logo of SoftBank Corp in Tokyo
FILE PHOTO: People walk behind the logo of SoftBank Corp in Tokyo December 18, 2014. REUTERS/Toru Hanai/File Photo

TOKY: SoftBank Group Corp is buying back up to US$4.8 billion of its shares after their recent slump, a move that partially met the demand of activist fund Elliott Management but failed to soothe investors panicking from the coronavirus pandemic.

The Paul Singer-led hedge fund backed SoftBank's buyback of up to 7 per cent of its shares for as much as ¥500 billion (US$4.8 billion).

It comes after Elliott pressed SoftBank earlier this year for US$20 billion in stock buybacks by selling down its stake in Chinese e-commerce giant Alibaba, and follows a nearly 25 per cent decline in the Japanese investment group's shares in March.

"SoftBank's announcement of its intention to commence an initial buyback program of ¥500 billion is clearly an important first step in addressing the company's significant undervaluation, and one that Elliott supports," Elliott said in a short statement on Friday.

The activist investor, which manages roughly US$40 billion in assets, said SoftBank would be able to pursue more buybacks following the completion of the merger between its unit Sprint and T-Mobile.

A SoftBank spokeswoman said the company decided to go for the buyback after considering the risk that stock market volatility could increase the deep discount that SoftBank's stock has relative to the value of its holdings.

No fresh financing is planned for the buyback, the spokeswoman said.

"With SoftBank shares trading more than 50 per cent below fair value, buying back shares is a good idea. Not only is it a good price but previous buybacks have helped that holding company discount to meaningfully narrow," said Kirk Boodry, an analyst at Redex Holdings, who publishes on the Smartkarma platform.


SoftBank shares fell as much 9.6 per cent to a 14-month low on Friday amid a crash in global stock markets, but pared losses to close down 5 per cent in Tokyo.

The buyback will begin on Monday and will take place over a year, the company said in a statement.

SoftBank said last month it plans to borrow up to ¥500 billion from 16 domestic and foreign financial institutions using part of its stake in telecoms firm SoftBank Corp as collateral to boost its cash on hand.

The loan comes as its finances have been squeezed by losses at its US$100 billion Vision Fund and as SoftBank injects its own cash into a successor fund due to lacklustre appetite from outside investors.

Elliott, one of the world's most powerful activist investors, has amassed a holding of almost US$3 billion in SoftBank and has pressured the Japanese firm on a range of issues including buybacks and improving transparency.

SoftBank founder and CEO Masayoshi Son, who has repeatedly claimed that SoftBank shares are chronically undervalued, said last month that while open to potentially buying back shares he is no hurry to sell down the Alibaba stake.

The buyback plan unveiled on Friday follows a ¥600 billion share repurchase, its largest ever, announced a year ago. It funded that program with proceeds from the bumper IPO of SoftBank Corp.

Source: Reuters