SoftBank $41B Buyback Sends Stock Soaring

SoftBank Group Corp’s SFTBY directors have approved a plan to repurchase shares totaling 4.5 trillion yen or $41 billion, leading to the company's stock registering the biggest daily gains in 12 years.

What Happened

SoftBank Group (SBG) announced Monday its plans to sell, or monetize assets to the tune of $41 billion, to repurchase shares worth $18 billion of SoftBank’s common stock. The balance will be used for debt redemptions, bond buybacks and cash reserves.

The transactions will take place over the next four quarters and are on top of a previous buyback announced this month. The Group currently has $245 billion in assets and $15 billion of cash on its balance sheet.

Masayoshi Son, Chairman and CEO of SoftBank Group, said in a statement, “This program will be the largest share buyback and will result in the largest increase in cash balance in the history of SBG, reflecting the firm and unwavering confidence we have in our business.” He said that the repurchase would allow the group to strengthen its balance sheet while significantly reducing debt. The monetization of assets would account for less than 20% of SoftBank’s current asset value.

Why It Matters

SoftBank shares soared in Tokyo after the buyback was announced. The shares clocked their biggest daily rise in 12 years and closed higher by 18.61%.

Elliot Management Corp., which increased its stake in SoftBank last month, was clamoring for a buyback in the range of $10-$20 billion. The investor also wanted the Group to improve transparency and reform its decision-making structure at the “vision” fund. 

SoftBank said that it believes its shares are “substantially undervalued” and, as of the end of last week, traded at 73 percent discount to their intrinsic value, which the company claimed was the largest discount in its history. 

The two buybacks, announced in March, would lead to the retiring of 45% of SoftBank’s stock. The company stated that the buyback and debt reductions would enhance its credit rating.

Price Action

Softbank’s OTC shares traded higher by 2.15% at $13.06 on Friday. The company’s shares closed higher by 18.61% at $28.92 in Tokyo on Monday.