TOKYO • SoftBank Group shares jumped the most in a decade yesterday on plans to repurchase as much as 600 billion yen (S$7.4 billion) of stock, a shift in strategy for founder Masayoshi Son, who has long favoured spending his capital on technology investments.
He unveiled SoftBank's biggest-ever buyback as he tries to close the gap between what he thinks the group is worth and its market value.
It will be funded with proceeds from the 2.4 trillion yen initial public offering (IPO) of the company's telecommunications unit last December. The stock rose 18 per cent, the most since November 2008, reaching the daily limit to close at 9,962 yen.
"This latest buyback changes the equation and puts a floor under SoftBank stock," Jefferies Group analyst Atul Goyal wrote in a report.
Mr Son spent much of his post-earnings presentation on Wednesday explaining that SoftBank's holdings are worth 21 trillion yen net of debt, while the market value is 9 trillion yen.
The gap is even laid out on its website, which shows the stock trading at a 50 per cent discount to a sum-of-the-parts calculation that includes the telecoms unit, Alibaba Group Holding, US carrier Sprint Corp and Yahoo Japan Corp.
"What is that gap all about? Isn't that weird?" Mr Son said at the briefing. "I personally think the share price is too low."
SoftBank's 600 billion yen buyback added more than twice that amount to the value of its stock. Its market cap rose by about 1.9 trillion yen, to 11 trillion yen.
SoftBank has had success with buybacks in the past. In 2016, Mr Son announced that the Tokyo-based company would buy as much as 500 billion yen, which sent shares up by the limit the next day. The price doubled over the next year.
Of the total raised from the telecoms unit's IPO, 700 billion yen will go towards debt repayment, 700 billion yen for investments and 600 billion yen for the buyback, Mr 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 (S$136 billion) Vision Fund. The company's portfolio includes the world's biggest ride-hailing company, Uber Technologies, and co-working giant WeWork.
Thanks to valuation gains, profits from SoftBank's Vision Fund and Delta Fund more than trebled to 176 billion yen.
"The share repurchase fits perfectly with the goal of boosting the company's valuation," said Shinkin Asset Management chief fund manager Naoki Fujiwara.
The Vision Fund sold all of its shares in US graphics chipmaker Nvidia Corp last month, worth 398 billion yen, SoftBank said.
News of the share sale first emerged last 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 yen on the stake.
The share repurchase period is from yesterday until the end of January next year, when the stock will be retired.
SoftBank's operating income rose 60 per cent to 438 billion yen in the last three months of last year. Revenue rose about 5 per cent.
"The results were very good," said Mr Fujiwara. "The operating business is doing well, and the Vision Fund adds to that."
The telecoms unit yesterday reported a 24 per cent increase in profit during the quarter, despite a mobile service failure that hit millions of customers before its IPO last December. The company kept its outlook for net income to climb 4.8 per cent to 420 billion yen in the fiscal year ending next month.
It is also readying a new fund focused on Latin America that will be run by chief operating officer Marcelo Claure, people familiar with the matter said last week.
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