SoftBank's Masayoshi Son unveiled plans for an initial public offering of his domestic telecom operation, signalling the evolution of his business empire and his increasing focus on investments in start-ups such as Uber Technologies.
The separation of SoftBank’s activities, essentially into investing and telecommunications arms, will bring “greater clarity and thereby better respond to the various needs of investors”, SoftBank said on Wednesday. Mr Son said the telecom business will emphasise dividend payments and that he’s aiming for a listing within a year.
Mr Son became technology's biggest investor over the past year, taking major stakes in ride-hailing, e-commerce and semiconductors. But he does not get much credit for his investment acumen.
SoftBank trades well below the value of its assets, including equity in public companies like Alibaba and Yahoo Japan. The gap has actually widened in recent months to the point SoftBank's market capitalisation is less than half its holdings, worth at least $180 billion.
Indeed, SoftBank’s was little changed in the past year, while its stake in Alibaba alone increased by about $60bn.
The discount frustrates executives at SoftBank. They track the changes on a weekly basis and are now planning to step up efforts to close the value gap, according to a person familiar with the matter. They plan to make more transparent how the planned $100bn Vision Fund will benefit SoftBank and how its start-up investments are valued, said the person, asking not to be identified because the matter is private. Investors are desperate for more clarity.
“The portfolio has grown too broad,” said Mitsushige Akino, an executive officer with Ichiyoshi Asset Management in Tokyo. “Son needs to make it clear whether this is a telecommunications company or an investment fund.”
Mr Son hopes the IPO will do just that. “With the IPO of SoftBank’s Japan operations, the various parts of the company can continue to grow independently,” he said. “This way I can also spend more time on longer-term global corporate strategy.”
Since its founding in 1981, SoftBank has grown from a software wholesaler into a global telecom and investment company. Mr Son, who has said the information revolution is SoftBank’s core business, has used earnings from his telecom operations to fund investments in overseas technology companies.
And he is showing no sign of slowing down.
Last month, the Vision Fund agreed to invest $300 million in Wag Labs, a start-up that uses a smartphone app to connect dog walkers with dog owners, and led an $865m investment in Katerra, a construction-technology start-up seeking to shake up the building industry.
“Son is looking for something that can become the new core of the company,” Mr Akino said. “Many investors continue to believe in him, but they want more clarity on where he is heading. And they don’t want to wait too long.”
SoftBank unveiled plans for the IPO as it reported earnings that fell short of estimates. Operating profit was ¥274bn (Dh9.18bn) in the nine-month period ended December, the Tokyo-based company said on Wednesday. That's less than the ¥293bn average of analysts' projections compiled by Bloomberg. Sales came in at ¥2.4 trillion, beating predictions of ¥2.3tn.
Earnings from domestic operations may come under pressure as billionaire Hiroshi Mikitani’s Rakuten plans to become the country’s fourth major mobile-phone operator. Mr Son, whose acquisition of Vodafone’s Japan business in 2006 was the industry’s biggest shake-up in recent history, has said he welcomes the competition.
Earnings before interest and taxes at domestic telecom operations fell 3.1 per cent to ¥964bn in the period ended December, as the company offered discounts to bring in new users. The company has 33 million subscribers.
SoftBank hasn’t said how much of the phone business it plans to sell or how much money it expects to raise, though it did say the unit would remain "major consolidated subsidiary."