Daily Management Review

SoftBank To Buyback More Shares And Reduce Debt In A $41 Billion Of Asset Sales Plan


SoftBank To Buyback More Shares And Reduce Debt In A $41 Billion Of Asset Sales Plan
An unprecedented move is being planned by SoftBank Group Corp to restore investor confidence as the investing company wants to raise as much as $41 billion to buy back shares and reduce debt. The shares of the company as well as those of its portfolio companies has been plummeted by the rout of the global financial markets because of the spread of the coronavirus pandemic globally.  
This plan by the Japanese tech conglomerate was made at a time when it is struggling with an increasing financial squeeze on the company and its $100 billion Vision Fund, which has seen tow straight quarters of losses after tech companies where it had invested did not perform well. Added to it was the global market rout because of the coronavirus pandemic.
After the company announced that it would sell or monetize up to 4.5 trillion yen ($41 billion) of assets to buy back 2 trillion yen of its shares, there was a 19 per cent jump in the shares of the company which was the highest daily jump for the stocks in almost 12 years. The company had already announced a 500 billion yen buyback earlier this month.
The asset sale will be executed over the next four quarters.
“This will allow us to strengthen our balance sheet while significantly reducing debt,” Chief Executive Masayoshi Son said in a company statement without specifying what will be sold.
The investments made by the Japanese company on start-ups such as WeWork and Uber has already created investor confidence as most of the companies have faltered in recent times resulting in the company’s stock price being brought down significantly.
Analysts and investors who were concerned by the willingness of the company to leverage the company did not take well the plans of the company to fund the initial 500 billion yen buyback with debt.
The company said in the statement that the repaying debt, buying back bonds and boosting cash reserves would be the areas where the company would be using the funds generated apart from share buyback. That would reflect the “firm and unwavering confidence” in the business that the founders of the company have, the statement said.
Redex Holdings analyst Kirk Boodry said that because of the current fragile state of the global markets, SoftBank could seek to divest its stakes in the merged Sprint and T-Mobile US or Chinese e-commerce giant Alibaba.
The company had earlier sold off its stake in Alibaba – where SoftBank had 25 per cent ownership, in a transaction that was a complicated one, just before the 2016 purchase of chip designer Arm.
“That’s a wake-up call that investors are really worried,” Boodry said, overriding Son’s previous reticence to slim the portfolio.