SoftBank to buy back up to 7% of stock for $6.7b

TOKYO • SoftBank Group plans to spend up to 500 billion yen (S$6.7 billion) buying back as much as 7 per cent of its shares, taking a step advocated by activist investor Elliott Management to boost stockholder value.

The buyback will run from next Monday through to March 15, 2021, and the shares will be retired, the company said in a statement yesterday. SoftBank shares fell despite the announcement, dropping as much as 9.2 per cent along with the broad market decline.

The buyback falls far short of Elliott's envisioned amount. The activist investor took a stake of almost US$3 billion (S$4.2 billion) in SoftBank, arguing that the company's shares are substantially undervalued compared with its assets. It has advocated for a share buyback of as much as US$20 billion, along with governance changes and more transparency about its investments.

Founder Masayoshi Son has also argued that his shares are undervalued. SoftBank has calculated the value of its shares may be more than double the current price.

But the Japanese company's portfolio of start-ups, which includes struggling names like WeWork and Oyo Hotels, remains particularly vulnerable to economic and market shocks from the coronavirus pandemic.

"The buyback continues SoftBank's practice of re-purchases following large drops in the share price," said Mr Justin Tang, head of Asian research at United First Partners in Singapore. "Given the long drawn-out acquisition period, it is unlikely to provide much support in a market driven by emotions."

The past 12 months have been tumultuous for Mr Son and SoftBank. The company unveiled a record buyback in February last year, sparking a rally that pushed its shares to the highest since its dot.com peak in 2000. Uber Technologies' disappointing public debut and the implosion of WeWork wiped out the gains over the next few months.

But SoftBank surged again after Elliott disclosed its stake and Mr Son won approval to sell his Sprint Corp to T-Mobile US.

The latest buyback comes as all of the gains from the activist's involvement have been wiped out by the growing fears around the coronavirus pandemic.

Investors have grown increasingly wary about SoftBank's and the Vision Fund's holdings in start-ups that have enjoyed abundant liquidity in past years. Mr Son met with fund managers and financial institutions in New York City this month, arguing that recent market declines were an opportunity to invest at discounted valuations.

But global economic uncertainty has strained fund raising and stoked worries that start-up valuations are stretched - particularly in sectors vulnerable to the outbreak such as ride-hailing and travel.

"Given the spread between what we consider to be the fair value of our company and growing market volatility, we decided on this policy for shareholder return," SoftBank spokesman Kenichi Yuasa said. "The amount reflects consideration of liquidity on hand and financial stability."

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