SoftBank Group Corp. or SoftBank, a Japanese conglomerate financial tech company, declared on Monday, March 23, 2020, that the group has decided to sell some of its assets to raise up 4.5 trillion yen ($41 billion). The raising fund would be used to buyback 2 trillion yen of its shares and reduce debt, claimed by the group after its stock had reached its biggest daily gain in nearly 12 years.
Biggest Budget for Repurchase
The latest share buyback was the additional package to the previous 500 billion yen buyback announced earlier this month, together makes the biggest ever repurchase of the Japanese tech conglomerate group. The latest move of the group was taken as the company faced a rapid financial crunch due to the loss of the two consecutive quarters because of the widespread virus epidemic.
A source reported that the buyback, which tops the $20 billion in purchases sought by activist hedge fund Elliott Management, has put pressure on SoftBank to improve shareholder returns. The share price of SoftBank has gained early on Monday, which led to closing up almost 19% following the announcement of the asset sales.
Without giving details on what would be sold by the group, the sale of assets would be executed over the next four quarters. For long, the investors were worried over the outlook for the company’s CEO, Masayoshi Son and his policy on startups such as WeWork and Uber due to the sharp decline of SoftBank’s share price. Nevertheless, the initial plan for 500 billion yen buyback with debt had received negative responses from the investors.
The fund from the sale of assets would be also used for repaying debt, besides buying shares, back bonds and boosting cash reserves, which reflected Son’s “firm and unwavering confidence” in the business.
An analyst at Redex Holdings, Kirk Boodry said, considering the unstable market conditions due to the virus epidemic, the Japanese tech group should have focused on its stakes especially in the merger deals with Sprint and T-Mobile or Chinese e-commerce giant, Alibaba.
Son previously had reduced its stakes in Alibaba, of which SoftBank currently owns 25%, in a complicated transaction deal ahead of the 2016 purchase of chip designer Arm. Meanwhile, it was analyzed that the asset sales would be under SoftBank’s conglomerate discounted price, or to set the price in the difference between its market capitalization and the value of its assets, which last week receded to a record 73%.
Considering the challenges of the recent move and overriding Son’s previous reticence to sell down his portfolio, Boodry said, “That’s a wakeup call that investors are really worried.” Meanwhile, the company is trying to pull out of a $3 billion bid to buy additional shares of the previously failed co-working startup, WeWork.
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