Abu Dhabi, UAETuesday 20 October 2020

Masayoshi Son cuts SoftBank shares pledged to lenders by $810m

The chief executive trimmed his committed shares by about 14 million to 213 million

SoftBank chief executive Masayoshi Son has been selling core assets to stabilise its balance sheet. AFP
SoftBank chief executive Masayoshi Son has been selling core assets to stabilise its balance sheet. AFP

Masayoshi Son has reduced the number of SoftBank Group shares he has pledged as collateral to lenders by about $810 million (Dh3 billion), cutting back after heavy borrowing had raised questions about the stability of his technology empire.

Mr Son trimmed his committed shares by about 14 million to 213 million, according to regulatory filings. The Japanese billionaire holds about 562 million shares directly and indirectly, which are worth $33bn before taking into account collateral.

Mr Son has revived SoftBank’s fortunes after the stock plunged in March because of business missteps and concerns about the coronavirus pandemic’s impact on his portfolio of start-ups.

SoftBank has since embarked on record assets sales and stock buybacks, helping more than double the share price from a low six months ago.

The SoftBank founder was asked about the issue in May and he said he had borrowed about 500 billion Japanese yen ($4.7bn) against stock worth more than 2 trillion Japanese yen.

“It’s about 20 per cent of what I own so I don’t think it’s a big problem,” he said at the time.

A SoftBank spokesman declined to comment further. The shares rose 1 per cent in Tokyo trading on Friday.

It’s not unusual for top executives to borrow against their shares. As of June 30 though, Mr Son had committed about 40 per cent of his equity to lenders, among the highest pledges, according to regulatory filings reviewed for the Bloomberg Billionaires Index.

A Thursday filing showed a decline of about 18 million in Mr Son’s committed shares. Then on Friday, that total was revised in a new filing indicating he increased his pledged shares to a Nomura Holdings unit by 4.4 million.

Mr Son has pledged the most shares to Credit Suisse Group and Daiwa Securities Group, followed by more than a dozen other banks, the Thursday filing showed. Bank of Singapore was added as a lender since March, with 4.72 million shares committed.

One analyst took the news to mean that Mr Son is unlikely to attempt taking SoftBank private, an idea that resurfaced in recent weeks as the company sold assets and raised cash.

“Now we hear he is cutting his shares pledged to lenders,” said Amir Anvarzadeh, a market strategist at Asymmetric Advisors in Singapore.

“If there was going to be a buyout, surely he would need as much leverage as he can get his hands on.”

Separately, Mr Son cut back on the stock that he has loaned out to financial institutions, reducing the total to about 100 million shares from 145.5 million in March.

While the two figures are often mixed together, the transactions serve different purposes. An executive like Mr Son would typically pledge shares as collateral to receive cash from financial institutions, perhaps to avoid the taxes or loss of control that come with selling shares.

On the other hand, he might lend stock to financial institutions for a return to increase market liquidity. The institutions may work with short sellers, for example, who are betting on a decline in the price.

The result typically is that shares loaned out by an executive don’t have the same kind of risk as shares pledged as collateral. An equity holder like Mr Son can reclaim the former without having to repay loans.

Updated: September 25, 2020 06:16 PM

Editor's Picks
Sign up to our daily email