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Thursday, December 2, 2021

Under pressure from investors, SoftBank announced the repurchase of US$8.8 billion in stocks

The founder of Softbank, Masayoshi Son, promised to implement a 1 trillion yen ($8.8 billion) stock repurchase plan within the next 12 months, succumbing to investors after the company’s Vision Fund department disclosed a record quarterly loss of 825.1 billion yen pressure.

Market expectations for a new round of share repurchases have been rising, and some of the company’s largest shareholders, including the rights protection hedge fund Elliott Management, are frustrated by the downturn in the Japanese technology group’s share price.

The original Vision Fund was a USD 100 billion investment vehicle backed by Saudi Arabia by SoftBank. Its publicly traded investments in China were hit by the government, while other big bets such as South Korean e-commerce group Coupang faltered.

Despite the setbacks, Sun Zhengyi said that he will speed up the investment of the Vision Fund’s follow-up fund. As of the end of September, the fund has allocated 15% of its US$33 billion capital to China.

In the July-September quarter, SoftBank reported a net loss of 397.9 billion yen, compared with a profit of 627.5 billion yen in the same period last year, as profits from its domestic telecommunications business helped narrow the loss of the Vision Fund division.

In just 12 months, the group’s net asset value plummeted from ¥27.9tn to ¥20.9tn, mainly due to the regulatory crackdown on the Chinese e-commerce group Alibaba.

“We are facing a big storm again,” Sun Zhengyi said at a press conference.

Vision Funds’ quarterly losses were also greater than the 788.6 billion yen losses reported by the group in the January-March 2020 quarter, when SoftBank launched a $23 share repurchase program to curb market turmoil caused by the pandemic. Its stock price plummeted sharply.

SoftBank’s share price reached a peak of 10,700 yen in mid-March, but as the large-scale stock repurchase came to an end last year, SoftBank’s share price fell by more than 40%.

Sun Zhengyi said that the board of directors approved a new round of share repurchases on Monday, but he warned that the plan may not reach the upper limit in the next 12 months.

“I firmly believe that the current stock price provides a huge buying opportunity. We will also retain enough capital for investment,” said the billionaire founder who owns more than one-third of the company’s shares.

A long-term investor in SoftBank questioned how long the impact of new share repurchases will last. “Repurchase has always been an easy way to drive short-term stock prices, but it has not helped long-term institutional investors,” he said. “After a period of time, the stock price tends to fall, and SoftBank investors are confused about what should be the driving factor for the stock price.”

Sun Zhengyi added that the geographic footprint of the Vision Fund is becoming more diversified, with 35% allocated to the United States and 19% deployed in China.

For the second Vision Fund, 9% of its capital is allocated to India, and ride-sharing group Ola and payment group Paytm plan to conduct an initial public offering in India.

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