Softbank's telecom unit stock price underperforms after IPO

The unit debuted on the Tokyo Stock Exchange on Wednesday

SoftBank's telecom unit was listed on the Tokyo Stock Exchange on 19 December 2018 and it is the biggest initial public offering ever in Japan. EPA/

The shares of SoftBankGroup’s Japanese telecom business fell at the start of trading after Masayoshi Son raised 2.65 trillion yen ($23.6bn) in an initial public offering.

SoftBank, the new entity trading under ticker 9434 on the Tokyo Stock Exchange, declined 9.3 per cent to 1,360 yen at midday in Tokyo on Wednesday. Of the investors who bought the stock at the offering price of 1,500 yen, 90 per cent were individuals and the rest were funds and money managers.

SoftBank and its underwriters — Nomura Holdings, Deutsche Bank, JPMorgan Chase & Company, Sumitomo Mitsui Financial Group, Mizuho Financial Group and Goldman Sachs Group — stuck to its price for the offering instead of a range, even amid a Japan-wide network outage and a continuing global equities selloff.

Mr Son is selling a stake in his crown-jewel domestic telecoms business to fund further investments in global technology companies, a portfolio that already includes Uber Technologies and WeWork. The listing also comes at a time when Japan’s wireless industry has come under pressure from the government to reduce phone bills. The entry of e-commerce giant Rakuten is also raising the risks of a price war next year.

Including a greenshoe overallotment of about 160 million shares, SoftBank sold a total of roughly 1.76 billion shares.

“Once the levee broke at 1,500 yen there was nothing that was going to hold it up there,” said Andrew Jackson, head of Japanese equities at Soochow CSSD Capital Markets. “Looks like the majority of the greenshoe has been spent already.”

SoftBank is looking to tempt investors with a dividend payout ratio of about 85 per cent of net income. Based on net income in the latest fiscal year and the 1,500 price at offering, that would work out to a yield of almost 5 per cent.

“It’s disappointing,” said Hideyuki Sakai, who runs a technology company in Tokyo and bought 1,000 shares in the IPO. “I am holding the shares for a while, anticipating the high dividend payment.”