Softbank is launching an emergency ¥4.5 trillion (£35bn) asset sale to buy back shares and reduce debt in a bid to restore investor confidence as the global stock market rout pummels its shares and portfolio companies.
The measures come as the Japanese investment giant and its $100bn Vision Fund, which has recorded two consecutive quarterly losses following soured tech bets, battle growing financial pressure compounded by the coronavirus pandemic’s impact on the global economy.
Softbank shares jumped almost 19 per cent on Monday, the biggest daily jump in 12 years, after it unveiled the programme, which includes a plan to repurchase ¥2 trillion of its own shares on top of an ¥500m buyback announced 10 days ago.
With the two combined share buybacks the conglomerate will be purchasing 45 per cent of its own stock, exceeding the $20bn of purchases demanded by activist investor Elliott Management.
Elliott which has put pressure on Softbank to improve shareholder returns and transparency after building a $2.5bn stake in the company.
“This programme will be the largest share buyback and will result in the largest increase in cash balance in the history of SBG [Softbank Group], reflecting the firm and unwavering confidence we have in our business,” said Masayoshi Son, the group’s founder and chief executive.
“This will allow us to strengthen our balance sheet while significantly reducing debt,” Son added.
Softbank did not disclose which assets it would sell from its sprawling portfolio in the sale, which will take place over the next year, but analysts are focusing on the group’s $140bn stake in Chinese ecommerce giant Alibaba.
Son previously offloaded part of the stake in Alibaba in a complicated transaction ahead of the 2016 purchase of chip designer Arm.
Softbank’s share price has halved over the past month amid investor skepticism over Son’s outsize bets including Uber and Wework.
The conglomerate’s bet on the embattled office space provider has soured further in the past week after it emerged that Softbank is considering pulling out of a $3bn (£2.6bn) deal to purchase extra Wework shares.
Two of Wework’s directors, Bruce Dunlevie and Lew Frankfort, have criticised Softbank for its attempts to renege on the deal.
“Not only is SoftBank obligated to consummate the tender offer as detailed by the master transaction agreement, but its excuses for not trying to close are inappropriate and dishonest,” the pair said yesterday.