SoftBank plans to sell up to $59.7b of assets

TOKYO • SoftBank Group plans to raise as much as US$41 billion (S$59.7 billion) to buy back shares and reduce debt in an unprecedented move to restore investor confidence as the market rout pummels its shares and its portfolio companies.

The Japanese tech conglomerate's plans come as it contends with a growing financial squeeze on the company and its US$100 billion Vision Fund, which has recorded two consecutive quarters of losses after its tech bets fell short, compounded by the coronavirus pandemic's impact on the global economy.

Its shares jumped 19 per cent for their biggest daily gain in nearly 12 years after the pledge to sell or monetise up to 4.5 trillion yen (S$59.7 billion) of assets to buy back 2 trillion yen of its stock in addition to a buyback of up to 500 billion yen announced earlier this month.

The buyback tops the US$20 billion of purchases sought by activist investor Elliott Management, which has put pressure on SoftBank to improve shareholder returns, and will retire 45 per cent of the group's shares.

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.

Its share price has been hammered by investor scepticism over the outlook for Mr Son's bets on start-ups like WeWork and Uber.

SoftBank's plans to fund the initial 500 billion yen buyback with debt was received negatively by analysts and investors who were concerned by Mr Son's willingness to leverage the company.

Beyond the buyback, proceeds will be used for repaying debt, buying back bonds and boosting cash reserves, reflecting Mr Son's "firm and unwavering confidence" in the business, it said in a statement.

Given the fragile markets, SoftBank may look to sell its stakes in the merged Sprint and T-Mobile US or Chinese e-commerce giant Alibaba, Redex Holdings analyst Kirk Boodry said. Mr Son previously monetised part of the stake in Alibaba, of which SoftBank currently owns 25 per cent.

The asset sales come as SoftBank's conglomerate discount, or the difference between its market capitalisation and the value of its assets, last week yawned to a record 73 per cent.

"That's a wake-up call that investors are really worried about," Mr Boodry said.

High on the list of pressing problems for SoftBank is a fight brewing over a major soured bet, the co-working start-up WeWork, as SoftBank eyes pulling out of a US$3 billion bid to buy additional shares.

A special committee of WeWork's board is preparing for a fight against SoftBank, saying it should complete its tender offer as promised.

In a message to stockholders, SoftBank cited numerous government inquiries into WeWork, including those from US attorneys and the Securities and Exchange Commission.

The WeWork stock purchase was part of a rescue financing offer from SoftBank after the office-sharing company's failed initial public offering last year.

SoftBank changed its stance on the deal as markets plunged amid the spread of the coronavirus.

While the majority of WeWork locations remain open, tenants could choose not to renew short-term leases as the pandemic mandates working from home in some areas, leaving the company on the hook for billions in long-term lease liabilities.

REUTERS, BLOOMBERG