SoftBank announces plan to sell assets worth Dh149bn

Japanese conglomerate is looking to use proceeds of sales to cut debt and buy back shares

Activisit hedge fund Elliott Management had been pressing Softbank to hand up to 2.2 trillion yen to shareholders through buybacks. Reuters  

SoftBank Group said on Monday it is selling or monetising up to ¥4.5 trillion (Dh149bn) in assets to buyback up to ¥2tn of its shares and reduce debt, sending its stock soaring to the biggest daily gain in nearly 12 years.

The share buyback will be in addition to the ¥500bn buyback the Japanese technology conglomerate announced earlier this month. It is also bigger than the $20bn (Dh73.5bn) of share repurchases that were being sought by activist hedge fund Elliott Management. The move could lead to Softbank retiring 45 per cent of its shares.

The asset sales are being planned during a financial squeeze on SoftBank and its $100bn Vision Fund, which has recorded two consecutive quarters of losses as its tech bets fall short with global economic growth sputtering due to the coronavirus pandemic.

SoftBank's share price extended early gains on Monday, closing up almost 19 per cent following the announcement of the asset sales, which will be executed over the next four quarters.

SoftBank did not specify which of its assets would be sold.

SoftBank's share price has been hammered by investor scepticism over the outlook for chief executive Masayoshi Son's bets on start-ups such as WeWork and Uber.

Its plans to fund the initial ¥500bn buyback with debt was received negatively by analysts and investors who were concerned by Mr Son's willingness to leverage the company.

Beyond the share buyback, proceeds will be used for repaying debt, repurchasing bonds and boosting cash reserves, reflecting Mr Son's "firm and unwavering confidence" in the business, Softbank said.

Given the fragile markets, SoftBank may look to monetise its stakes in the merged Sprint and T-Mobile US telecoms company or Chinese e-commerce giant Alibaba, Redex Holdings analyst Kirk Boodry said.

Mr Son previously offloaded part of the stake in Alibaba, of which SoftBank currently owns 25 per cent, in a complicated transaction ahead of the 2016 purchase of chip designer Arm.

The asset sales come as SoftBank's conglomerate discount, or the difference between its market capitalisation and the value of its assets, last week grew to a record 73 per cent.

"That is a wake-up call that investors are really worried," Mr Boodry said, overriding Mr Son's previous reticence to sell down his portfolio.

High on the list of pressing problems is a fight brewing over a major soured bet on co-working start-up WeWork, as SoftBank considers pulling out of a $3bn bid to buy additional shares.