SoftBank shares jump 11% on $ 9 billion buyback

The SoftBank Corps logo is pictured at a press conference in Tokyo, Japan, February 4, 2021. REUTERS / Kim Kyung-Hoon

  • Buyback is SoftBank’s second largest ever
  • SoftBank crashed to quarterly losses
  • The shares have lost 40% since the end of the Y2.5 trln program in May
  • Stocks lack catalyst due to crashes in China, delay in arms sales

TOKYO, November 9 (Reuters) – SoftBank Group Corp (9984.T) shares rose 10.5% on Tuesday, the first trading session after the Japanese conglomerate said it would spend up to 1 trillion yen ($ 8.8 billion) ) to buy back almost 15% of its shares.

The company announced the buyback, long speculated in by the market, after it revealed that the quarterly result crashed to a loss in the middle of a decline in the share prices of the portfolio companies and a regulatory intervention in China.

SoftBank’s shares closed at 6,808 yen in its biggest daily increase in 11 months, lifting the group’s market value above $ 100 billion. Tuesday’s trading volume was more than double the 30-day average.

The buyback is SoftBank’s second largest after a record acquisition of 2.5 trillion yen which was launched during the depths of the COVID-19 pandemic last year. The shares in the technology group quadrupled during this buyback, but have since fallen 40% from a peak in May.

“Our analysis of repurchase history indicates that SBG shares are performing (and surpassing indices or BABA) during repurchases,” Jefferies analyst Atul Goyal wrote in a note, referring to Alibaba (9988.HK), the group’s largest asset. SoftBank owns approximately a quarter of Alibaba’s shares.

The fall in the Chinese e-commerce giant’s shares and the broader regulatory setback in China contributed to a $ 57 billion fall in SoftBank’s net assets to $ 187 billion, a calculation that CEO Masayoshi Son has said is the primary goal of SoftBank’s success.

Reuters graphics

The repurchase period for the last repurchase runs until November 8 next year, and the group signals that the program may take longer than the quick purchases last year.

The buyback “is fine support, but it’s not rocket fuel,” wrote LightStream Research analyst Mio Kato on the Smartkarma platform, adding “there are significant downside risks if broader technology, especially unprofitable technology, falters.”

Speculation that SoftBank could launch a repurchase has been going on for several months as the discount – the gap between the value of the assets and the share price – has remained frustrating for executives and as investors push for repurchases.

Ongoing uncertainties include the prospect of obtaining regulatory approval for the $ 40 billion sale of chip designer Arm to Nvidia (NVDA.O).

Delays in the sale “may have given Softbank the flexibility to announce a buyback now with expectations of increasing share purchases later,” Redex Research analyst Kirk Boodry wrote in a note.

SoftBank is increasing its investments via Vision Fund 2, which has $ 40 billion in committed capital from the group and Son itself, even though it is closing down the activity of the trading arm SB Northstar.

“Even if the company manages its finances with some discipline, share repurchases are likely to erode the financial buffer if implemented,” S&P Global Ratings analysts wrote in a note.

The conglomerate had more than 5 trillion yen in cash and cash equivalents at the end of September, an increase of 9% compared to six months earlier.

($ 1 = 113.3500 yen)

Reporting by Sam Nussey; Edited by Sam Holmes, Stephen Coates, Jane Wardell and Raju Gopalakrishnan

Our standards: Thomson Reuters Trust Principles.

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